Just a few years ago, the financial sector was the key player in everything related to the payment of goods and services. Mobile transactions, i.e. direct payments aided by smartphones and other mobile technology, are now shaking up the market.
New players, from mobile service providers to cyber merchants, are penetrating the market and forcing the traditional financial sector to take action. A recent study published by GFT Technologies - a Stuttgart-based, international IT solutions provider for the financial sector - sheds light on the rapidly growing mobile payment ecosystem and analyses the impact these developments are having on banks. One finding: much to their advantage, financial institutions possess a high level of credibility amongst customers.
In many cases, when people are out and about and don't want to use cash, they no longer have to depend on debit or credit cards. Instead, there are now a number of different payment options which circumvent the traditional bank altogether. These include mobile wallets, virtual cards, in-app payment solutions or direct carrier billing systems, which basically involve making payments via private phone bills. One side effect: the monopoly financial institutions have enjoyed on payment-related issues will continue to diminish if they don't react to this trend soon.
But how should financial services providers position themselves within the context of this mobile payment phenomenon? What opportunities will arise, and what must happen in order to take advantage of them? A study published by GFT delivers valuable pointers for institutions facing this challenge. Marika Lulay, Chief Operating Officer at GFT, knows what a sensitive subject mobile payment is for the financial sector: "The international mobile payment market is growing rapidly. As a result, a well thought-out mobile banking strategy has become a business imperative for banks. Payments issues should be at the core of such a strategy."
One recommendation made in the GFT study is that banks must track market developments closely and adapt their mobile operations to specifically address the needs of their customers. In particular, the user experience of the spectrum of mobile offerings will be central to acceptance and trust. The first step of the entire process will be to convince customers to become actively involved in mobile transactions. This could take place in the form of trial runs.
Another finding from the GFT study: partnerships create potential. "Financial services providers need to think outside the box and be on the lookout for the right development and retail partners. Co-marketed mobile payment solutions have more impact and can open up the door to much greater business opportunities," states Lulay.
The market is huge: according to KPMG, a leading auditing and advisory firm, more than one trillion US dollars will have been invested in mobile payment solutions by the year 2015. As a result, more and more finance services providers are expanding their business activities in the area of mobile payments. The prospects for success look good: the GFT study shows that banks have a credibility advantage over competitors from outside the industry due to their close relationships with customers. And they should start making the most of this advantage as soon as possible. The best opportunities exist especially if businesses can succeed in combining mobile payments with big data options. The huge amount of information available - data on customers - could be analysed in real time and used to provide immediate recommendations.
One source of development support for financial services providers in their quest for innovative mobile payment applications is GFT, which places huge emphasis on security aspects. At CeBIT, for example, GFT presented NFC-TAN: a new mobile authentication process developed in collaboration with the University of Tübingen. An additional solution promising added levels of security is GFT's voice biometric prototype. Both applications use two separate data transfer channels to ward off Trojans - a requirement paramount to customers. Additionally GFT has also already developed apps that can be easily expanded with payment functions.