Two new deals ahead of Mobile World Congress (MWC) illustrate the growing scramble for customer share and revenues in the mobile payments market worldwide. On February 24 Google acquired US mobile payments company Softcard, the joint venture backed by Verizon Wireless, AT&T Mobility and T-Mobile, promising to pre-install Google Wallet on Android phones sold by the carriers. A week earlier Samsung announced that it had bought mobile payment company LoopPay—the service is rumoured to be set for debut on the smartphone maker’s devices very soon.
The deals come hot on the heels of other major announcements in the m-payments space. Apple launched its mobile payments service Apple Pay in the US last October; and US retailers, including giants Walmart, Target and CVS, recently formed the Merchant Customer Exchange consortium to operate their own mobile payments app, CurrentC. While this recent activity has centered on the US market, it is a strong sign of global growth in the next few years.
The agreements are also a reminder of the fragmentation in the market, with customers offered a range of payment methods from NFC-based transactions through to in-app purchases, messaging and web transactions, and direct carrier billing. Many analysts now expect Apple Pay to start to drive contactless (NFC) payments, which so far have gained little traction outside of Asia. Strategy Analytics, for example, forecasts global payments made via NFC-enabled phones will exceed $130 billion by 2020.
Security issues remain a barrier to adoption of such services, but financial organizations are working to alleviate concerns. Visa announced (also on February 24) that it will soon roll out “tokenization” technology in Europe, a system that replaces consumers’ credit card and account information with a randomized series of numbers during payment authorization when using a smartphone for contactless payment. Tokenization was launched by Visa, MasterCard and American Express ahead of the launch of Apple Pay in the US, and is expected to pave the way for its expansion into Europe. EMV, the global standard for interoperability, authentication and security of payment transactions, will also play a key role in supporting NFC-based mobile payment solutions.
Despite fragmentation and security concerns, there are signs that consumers increasingly are attracted to using their mobile devices to pay for goods and services. Juniper Research says 1.6 billion mobile phone or tablet users carried out mobile commerce transactions last year, and forecasts that will rise to just over 2 billion by the end of 2017. And as that growth continues, more enterprises and small-to-medium sized businesses will need to put the infrastructure in place to meet customer demand.
A winning m-payments solution requires careful consideration and implementation/transformation of a wide range of business and technology elements, including mobility, cloud computing, billing, security and systems integration. An enterprise needs business consulting and technology expertise in areas such as financial services, banking and EMV to get ahead.
Certainly, I’m following Mobile World Congress for all the latest on the mobile payments market. In the meantime, please don’t hesitate to reach out to me if you want to discuss the topic further.