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Mobile Payments Evolution not Revolution

As the global economy slowly emerges from the downturn in what is becoming an ever more aggressive marketplace, organisations are seeking to gain that all important edge over their rivals; with many turning to technology to maximise their competitive advantage.  

At the start of the millennium the rise of the internet and e-commerce provided businesses with a vibrant new channel; to market, compete against, and complement, the established retail outlet and call centre channels. Today, many are looking at the rise of mobile technologies; the development of contactless, smartphones, and tablets, to drive consumer demand for mobile commerce and mobile payments. There are currently a plethora of technology options, developing through numerous pilots which allow brands and early adopters to test the market place.  With countless technology manufacturers, systems integrators and service providers touting their wares and jostling for position it’s no wonder organisations are struggling to know where to start. 

For those of us with long memories, the hype around mobile started back in the year 2000, when analysts and experts predicted dramatic growth of m-commerce and m-payments.  In 2002, Mobile Monday predicted that the m-payment market would rise from virtually nothing to over $55bn by 2006.  However, despite the hype the market didn’t take off.  In 2006 Mobile Monday revised their prediction dramatically, suggesting a far slower growth rate to circa $10bn by 2010.  In contrast, Informa Telecoms & Media were far bolder in 2009, forecasting that by 2013 almost 300 billion transactions – worth more than US$860 billion – will be conducted using mobile devices. 

Despite these strong growth predictions mobile payment has remained an undelivered promise for the best part of a decade, and is still proving to be quite elusive. 

Investigations suggest the reasons for this are based on a number of factors; at a basic level the lack of clarity and understanding regarding what m-payments really means is limiting cooperation and standardisation across the industry.  There are five main areas for the use of a mobile phone in the context of a financial transaction; m-banking, m-order, m-delivery, m-authentication and of course m-payment.  Using the term m-payment to encompass all non payment functions dilutes and confuses the individual needs of each function, often resulting in requirements not being adequately identified or met. 

This lack of cooperation and standardisation becomes clearer upon closer inspection of the m-payments stakeholder map; which comprises six parties –financial institutions, mobile network operators (MNOs), technology providers, handset manufacturers, merchants and consumers.  Financial institutions and the MNOs are the primary drivers behind the development of m-payment solutions for both merchants and consumers.  However, these two parties are struggling to agree on a number of key issues, for example: who owns the customer, the location of the secure payment element (i.e. MNOs want the secure element on the phone SIM to lock the customer to the network, while the financial institutions want the secure element to be separate from the phone SIM to allow the customer to choose which MNO they want to use), the revenue sharing model, and branding in a cooperative environment.  Consequently, competing and contrasting pilots and trials are being driven and promoted by both stakeholder groups, which when combined with the various technological choices available, makes merchant and consumer choice highly confusing and complex. 

Although ‘mobile’ is regarded as a single channel it incorporates a number of different technologies which increasingly are being used to develop m-payment solutions in an m-commerce environment.

Key technology includes: 

  • Contactless (using Near Field Communication technology)
  • SMS (text messaging pervasive throughout the mobile world)
  • USSD (Unstructured Supplementary Service Data - a network dependant capability of modern GSM networks usually associated with real-time messaging or prescriptive menu driven interactions)
  • Mobile internet (initially via WAP and now more commonly via full web access through a mobile browser)
  • Traditional voice communications (including automated IVR type services as well as live agent interaction) 

Used in isolation or in combination, these technologies open up a plethora of m-commerce and m-payment options. 

So where do consumers and merchants go from here?  By 2013, Gartner predicts that mobile phones will overtake PCs as the most common web access device worldwide; and by 2014 over 3 billion of the world’s adult population will be able to transact electronically via mobile or Internet technology. So, from a consumer perspective mobile is here to stay and is now rooted as a necessary every day piece of the customer interaction puzzle.  From the increasing numbers of m-commerce and m-payment initiatives being developed and deployed across most market sectors, today  more and more merchants are gaining experience and competitive advantage, enabling anytime, anyplace, anywhere access for customers.  Despite the difficulties, complexities and options, now is the time to start evaluating and incorporating mobile as part of an integrated multichannel strategy, which delivers consumer benefit and competitive advantage – not just technology for its own sake.


Comments: (3)

A Finextra member
A Finextra member 17 January, 2011, 14:09Be the first to give this comment the thumbs up 0 likes

Good article. it helped me to note out some basic issues of m-payment which may help me to protect my bank's interest in future. as m-payment issues just have started in our country n hope to go further .... 

A Finextra member
A Finextra member 18 January, 2011, 09:15Be the first to give this comment the thumbs up 0 likes

Excellent text. Multichannel option is only way where mobile channels can bloom.

I was just counting my purchases over old and tired online by computer vs. mobile channels from year 2010. Most of the purchases (45 %) were made by credit card/computer, about 30 % was made by local payment options (bank debit transfer or payment button as Finns call it) over computer. But 25 % of purchases we made with mobile device. What makes this interesting, is that 95 % of those mobile purchases were made from iTunes. Why is that? I have 2 mobile phones made by Nokia, I have been using over 10 years mobile banking solutions from Nordea so you would assume me as early birds to test and use new services.

But iTunes made purchases so easy to buy while sitting on sofa with my iPod and add password for things I want to buy. That rest 5 % was made by using SMS ordering while I am in Helsinki and buy tram/metro tickets using SMS payments. It is made so easy to order tram ticket and not to worry about having cash or coins in my pocket.

User experience is key issue, what has to be implemented when planning new mobile solutions. As iTunes example tells us, when buying from computer or mobile is about the same, then end users will start to use it. 

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 19 January, 2011, 09:05Be the first to give this comment the thumbs up 0 likes

I think incorrect messaging from its key players is largely responsible for the yawning gap between forecasted and actual revenues of m-payments. Let me just cite two examples:

  1. For decades, it has been natural for people to carry their wallets with them when they leave home. In fact, there are several people - me included - who feel uncomfortable if we don't carry our wallets with us when we leave home. Against that backdrop, how effective is it for m-payments providers to keep harping on the message "don't bother to carry your wallets" to promote their wares? It's not as though carrying wallets is such a big pain that we need alleviation from m-payments. 
  2. For regulatory and / or other reasons, many types of m-payments in many countries are linked to a credit or debit card, which presupposes existence of a bank account. The one exception to this is GenY Mobile Payments like Bong and Zoku (more on them at However, most of go to market strategies of m-payments providers abound with messaging around "financial services for the unbanked", "there are 2 billion mobile phones in the world but only 400 million bank accounts", and the like. This creates a lot of disconnect for someone who wants to use m-payments because they don't have or don't wish to use a bank account for making payments and discovers that they can't. 

Current reality seems to indicate that mobile payments is just another channel  - besides branch, ATM and Internet Banking - for initiating and monitoring conventional bank-based payments. I guess m-payments will be able to achieve its true potential only if and when it can truly break out of that niche and becomes a fully fledged, self-standing method of payment. 

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