Mobile payment is THE hot topic in the card payments industry. The main focus is certainly around the major card schemes like Visa and MasterCard and how to put their cards into a mobile phone. Once this has been achieved, the functionality of the cards can be enriched like never before. From on-device cardholder verification to loyalty and much more, there is a lot of room for innovation.

With Google allowing HCE and more recently Apple Pay, there are technical solutions that allow creation of applications and business cases around mobile wallets.

I do not doubt that HCE and Apple Pay will be adopted in one form or another, sooner or later. Apple Pay has launched just at the right time - before the U.S. shopping season - and while some doubt its long term success (Why Apple Pay Is Fizzling and What It Means for the Future of Mobile Payments) others think that’s exactly where it is heading (Is Apple Pay Fizzling? No Way Man, It’s Sizzling!).

However the whole topic of loyalty is still a major issue as it requires integration with a merchant system. For a merchant, the following points are at least questionable when considering mobile wallets and loyalty programs:

• People paying with phones are only a small fraction of the people paying with cards, who are in general again only a part of all business. Therefore, in general, merchants are not willing to invest in customized POS solutions enabling only one specific wallet. Wallets must use the “existing rails”, POS terminals.
  As a side note, yes I do believe that iBeacons have a place in the market. Currently, I think they are about targeted ads more than about payment. The future will look different, maybe like this, but not yet.
• There is an abundance of wallet providers and wallet providers-to-be out there. Merchants will most likely not choose a certain wallet exclusively, for fear of losing business from other wallets. There are of course exceptions to that, but if they launch and then succeed, that is still an open question.
• The fundamental difference between Google’s HCE approach and Apple Pay increases the complexity. Apple most likely will not allow anything else to become an NFC payment app, resulting in no other IOS wallets than Apple Pay that can be used with POS terminals.

Considering the above issues it is understandable that merchants will wait and see. Maybe they will run a trial here and there and learn the technology. There will be several HCE wallets for the big scheme cards, and there will be Apple Pay. Merchants will have NFC terminals and not lose any business. Loyalty will be subject to support by these apps and solutions.

But what if a merchant can have its own app, with its own merchant-specific payment and loyalty functionality that is using the existing POS?

I will write about that in the next post. Sign up if you wish to be informed of when it will be published. And of course leave your comments, we appreciate it.