Global business ratings agency S&P Global tipped card payments to dominate point of sale (PoS) transactions in Europe and North America in the short- and medium-term, with mobile payment companies struggling to make an impact.
In a report assessing the effect of technology companies entering financial services, S&P said there could be a long-term opportunity for mobile wallet providers in the retail sector, though the companies would need to amend their business models to cash in on this.
Analysts said “the pays” (a term covering Apple, Google, Samsung, PayPal and similar wallet services) would either need to be more aggressive with transaction fees, or break away from Visa and Mastercard networks and create a direct connection between consumer bank accounts and merchants.
This, S&P added, is an avenue which could be created by new banking regulations such as the updated Payment Service Directive from the European Commission, which is designed to open up the financial sector.
In the current market, the agency said wallet providers remained reliant on traditional channels to process the transactions and several didn’t even take a card issuer fee.
“We believe that members of the pays offering mobile payment services to their customers currently pose a limited threat to banks’ ability to generate transaction fee incomes,” it said: “This is because the total volume of e-commerce and PoS transactions processed through mobile payment services remains low compared to the total amount of transactions processed through debit or credit cards.”
Although the technology sector posed a limited short-term threat in areas including payments, S&P was concerned technology companies may “leverage their strong customer bases and networks to potentially constrain traditional banks’ payment services revenues in the longer term.”