While the crowds at Mobile World Congress in Barcleona lap up the latest innovations in mobile payments and biometric security, party-pooping staff at the Federal Reserve Bank of Atlanta have cast a more sober eye over the potential for mass-market uptake of new-fangled payment methods.
In a collective blog post
, the Atlanta Fed's Retail Payments Risk Forum staff have put a damper on the more optimistic projections for 2016 as a breakthrough year for a host of new technologies, including mobile payments at the POS, same-day ACH and biometric uptake.
"Like the broken analog clock face that is correct twice a day, we believe that those forecasting 2016 as the 'year of mobile payments' (as they did in 2013, 2014, and 2015) will be a little bit right, but will still be waiting for this optimistic prediction to be fully true," they write. "While the adoption pace of mobile payments is growing because of the increasing influence of millennials, the issues of limited merchant acceptance points, fragmentation, and consumer concerns over security and privacy will remain as substantial hurdles."
Major educational efforts to convince consumers of the increased security provided by mobile payments through tokenisation and biometrics, will be needed before consumer acceptance becomes widespread, but even so, the user ID and password "will remain the primary authentication method that consumers use to access their various applications".
With major banks, tech giants and merchants all competing for a limited share of consumer wallet, the Risk Forum staffers believe that the mobile payments market in 2016 will continue to face upheavals.
"How many wallets will the consumer be willing to load on a phone and which providers do they trust to keep their payments and banking credentials safe?" they ask. "We believe we'll see continued turbulence in this space during 2016, with some settling of the dust by next year."
The Fed staffers are equally gloomy about the prospects for faster payments in 2016, forecasting that "ACH same-day service will not be a huge hit". The Fed is predicting that the roll-out of Nacha's mandated same-day ACH service in September will, at least initially, have modest adoption because corporate originators will have to update internal systems to support faster payments, the dollar cap of $25,000 per payment, and the imposition of the interbank fee. Likewise, consumer payment applications will see limited uptake due to competing payment alternatives.
On the US conversion to EMV, the Risk Froum, sees more positive signs of movements in the issue of chip cards and merchant terminal conversions, but forecasts a backdraft in the ATM market. Here the large owners and operators are expected to meet the October 2016 EMV liability shift deadline. However, the fed believes that many of the small and mid-sized operators, especially those owned by nonfinancial institutions, will not make the cut, and will be faced with absorbing the loss of transactions made with counterfeit cards — a fraud loss they haven't experienced in the past.
"Overall, the Risk Forum looks for the ATM base in the US to contract by 10 to 15 percent because of financial institution mergers and the cost of EMV upgrades."