Of the $15 trillion worth of retail transactions made worldwide in 2013, mobile payments amounted to $235 billion. Gartner estimates that mobile payments will exceed $720 billion a year by 2017. Mobile has become the first priority for development.
While it’s clear that mobile payments will continue to grow, the question remains whether banks will be the leaders in this space. Mobile is disrupting many industries—from education to transportation—and mobile technologies such as near field communications (NFC), GPS, and real time data are making old ways of doing things seem cumbersome and archaic.
We have become ever more comfortable using our phones to research, shop, and purchase goods and services. Mobile payments are becoming popular because they offer an easier and more convenient way. It’s also an option when other alternatives are not available.
And when mobile payment does change, it will cause a massive transfer of channel activity across the spectrum of ATM, Debit, Credit, iTunes, PayPal, and other offerings—disrupting service fees, damaging revenue streams, and perhaps weakening some financial services providers into bankruptcy or acquisition.
Next-Gen Mobile Payments Still Elude Us
Today’s heavily fragmented mobile payments landscape is ripe with opportunity.
Several attempts by device vendors and wireless service providers have been far too restrictive and required consumers to change devices, replace SIMs, or move providers in order to use mobile payments. And frankly, for most of us, it was just too inconvenient for a small improvement in the payment experience.
While Amazon can claim an e-commerce leadership role, PayPal is perhaps the best pure-play payment provider, but it’s in the middle of its own battle. Square is struggling to become profitable. While their card reader is nicely designed, their target market includes low volume, low transaction businesses, and they are finding it expensive and difficult to scale. Google’s Wallet attempt has failed to catch on. Google’s Wallet attempt was weakened by a lack of retailers upgrading their point-of-sale equipment to support NFC. Although plenty of smartphones had NFC, they just couldn’t be used at the store. ISIS (now Softcard) and MCX (now CurrentC) are still figuring out how to brand or re-brand and how to create a great user experience.
User Experience, Industry Adoption, and Trust are Critical Factors
At the end of the day, the critical factors for success are user experience, industry adoption, and trust.
User experience is a design challenge. Amazon solved this phenomenally well with the 1-Click ordering experience, but it’s only available within its own app and websites. PayPal recently rolled out “One Touch” for merchants and app developers to simplify the checkout flow and requiring only an initial authentication flow to PayPal while subsequent purchases just need a single touch. On the other hand, PayPal has struggled with innovation against competitors like Square and PayPal’s CEO famously mauled his employees for their reluctance to use their own app for mobile payments.
The most recent arrival, casting a long shadow, is Apple Pay. Waving your smartphone (or smartwatch) in front of a contactless payment station and using your thumbprint to authenticate is the ultimate effortless user experience versus fumbling to enter your PIN and launch an app. However, as experience has shown, new arrivals face both trust and adoption challenges compared to traditional providers. Not to mention, there is a fair amount of infrastructure to be adopted by retailers.
“A successful mobile payment provider must provide an effortless user experience combined with a level of trust and convenience that delights and empowers consumers.” Source: Appinion
Finally, think about who you would trust with your Mobile Wallet. We’ve all experienced the abysmal customer service from new digital providers who would like to be your wallet provider but only have email-based customer service—good luck with fraud or a missing mobile payment!
In actuality, your bank ranks very high on the trust ladder, and most banks are missing out on an opportunity to become the trusted wallet provider and cash management provider as we move to banking on our smartphones. Banks are not yet being disrupted as badly as the taxi business has been affected by Uber, Hailo and Lyft. But the meter is ticking!
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