The European Commission has just published a green paper seeking views about the obstacles that are stopping further integration of the card, internet and mobile payments market. The green paper looks at all three areas but unsurprisingly concentrates on card payments, given that’s by far the biggest. However, as we shall see, issues in the cards market have a knock-on effect for mobile payments as well as e-payments. Nonetheless this blog will initially focus on the m-payment aspects of the green paper. View the full green paper here.
The commission puts the case for common pan-European standards for m-payments. The benefits for consumers (think GSM) are the ability to pay for goods and services when travelling overseas. Also, integration boosts competition which would lead to lower prices and greater security, says the paper. Standardisation would also deliver interoperability, meaning users can more easily swap their electronic wallets between mobile operators or banks.
The paper does buy into the potential of mobile payments. However it quotes research by Gartner that says Western Europe had 7.1 million mobile payment users in 2010 compared to 62.8 million users in the Asia Pacific region. “One of the key reasons for the slower market take-up,” says the green paper, “is the highly fragmented mobile payment market”. The key players including mobile operators, payment providers and handset vendors have yet to agree on a business model that would enable interoperability, says the commission. The green paper’s views on fragmentation were actually leaked at the end of last year.
As a result of fragmentation it’s non-European m-pay initiatives that are the “most promising”, says the EC. The paper points to Apple, Google and Visa. Obviously it’s mistaken about the former which, despite speculation, has yet to announce its mobile payment strategy but the other two are certainly active.
Pointing to the lack of a concrete European framework that would address standards, security, interoperability and co-operation between market participants, the paper says the latter “seem reluctant to invest” as long as the legal situation regarding “collectives fee arrangements” is not settled. The fees argument relates mainly to cards but, says the commission, has an impact on internet and mobile payments too since mobile users will use electronic versions of conventional debit and credit cards in the wallets on their handsets. Fees make up a disproportionately large share of micro-payments which are the kind of transaction that in the future will be conducted via mobile phone.
In terms of existing move towards achieving interoperability, the EC points back to the October 2010 publication of a paper by the European Payments Council and the GSMA. The paper outlined the roles and responsibilities of mobile operators and banks in managing contactless applications. Hence discussions have started but according to the commission “tangible results have yet to be achieved and several important gaps still need to be filled”. The commission wants to see full interoperability between mobile payment services as well as the introduction of open standards. Both favour consumer mobility, it says. In addition it wants standardisation to address the portability of mobile payment applications. In other words, can applications follow consumers if they move between mobile operators?
The commission detects “a stalemate” between mobile operators, banks and other players, such as handset manufacturers and application developers. Operators “seem to be seeking to retain control of the business at least in their role for security manager of the service”. Meanwhile e-payment players want to muscle into the mobile market. The EC foresees “private players controlling the standards and, hence interoperability” with the result they will dominate the whole payment chain, including the device, the application platform and security. Such proprietary solutions risk fragmentation, it says. Also the paper argues for the consideration of other sectors which do not necessarily have a major role in standardisation such as public transport and health insurance but will be important for the future of mobile payments. Consultation is open until 11 April 2012 and the commission will announce its proposals before the summer. The process promises to be an interesting one.
The editorial views expressed in this article are solely those of the author(s) and will not necessarily reflect the views of the GSMA, its Members or Associate Members.