Mobile payments: Evolution not revolution? – Mobile World Live

Mobile payments: Evolution not revolution?

23 MAR 2011

By Neil Cook, Principal Consultant, The Logic Group

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 once again turning to
technology to help maximise their
competitive advantage.

At the turn of the century it was the rise of the internet and e-commerce that led the way in providing businesses with a new channel to market to compete against, or complement, the already well established retail outlet and call centre channels. In the new decade many are looking at the rise of mobile technologies, through the development of contactless, smartphones, and tablets to drive consumer demand for mobile commerce and mobile payments.

Jostling for position
However, as with all early technology advancements, one solution doesn’t fit all and there are a plethora of technology options developing through numerous pilots to allow 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. So what’s it all about and haven’t we been here before?

For those of us with long memories the hype around mobile started at the turn of the century with analysts and experts predicting dramatic growth in 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 this hype dramatic growth did not materialise and 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 mobiles!

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, but why?

Investigations suggest the reasons for this are based on a number of factors. At a basic level, the lack of a clear definition and understanding of what m-payments really means is limiting cooperation and standardisation across the industry. Looking logically there appears to be 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,).

By 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.

Cooperation and standardisation
The lack of cooperation and standardisation becomes clearer upon closer inspection of the m-payments stakeholder map, which comprises of six parties – the financial institutions, the mobile network operators (MNOs), the technology providers, the handset manufacturers, the merchants and the consumers. Of these the financial institutions and the MNOs are the primary forces leading 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 including: 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 that can and are being used to develop m-payment solutions in an m-commerce environment. These key technology choices include: 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), and; 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.

Where do we go from here?
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 it also appears some merchants are already grasping the nettle to gain experience and competitive advantage by enabling anytime, anyplace, anywhere access for customers. So despite the difficulties, complexities and options it appears that now is the time to start evaluating and setting mobile strategy as part of an integrated multichannel strategy that delivers consumer benefit and competitive advantage and not just technology for its own sake.


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