Advanced Payment Report 2014
Source: Edgar, Dunn & Company
In their 2014 Advanced Payment Report, independent global financial services and payments consultancy Edgar, Dunn & Company found that though the pace of innovation is unstoppable, mobile commerce will only truly take off if the companies pushing the new technologies focus on the good old fashioned values of building customer relationships to drive consumer adoption. Here’s our summary of their findings to give you an overview of what they predict and where they think the mobile payment industry is heading.
Mike Matan, Head of American Express Global Network Business, emphasises that: “Essentially, consumers seek a few fundamental things when it comes to taking up new products and services: added-value, convenience and simplicity. This is no different with mobile commerce.”
The findings of the Advanced Payments Survey (APS) suggest that mobile payments have only gained popularity in a limited number of markets – mainly in the developing world.
Affordable, fast and reliable mobile connectivity will soon be available globally. This will have a significant impact on mobile commerce.
“85% of respondents believe established alternative players [are] most likely to drive mobile payments growth.”
The most widely used alternative player in the payments industry is PayPal. Co-founder Peter Thiel is also an investor in Stripe. On mobile commerce, he commented: “If you knew how hard it is to break into these industries, you wouldn’t even try.”
Our main payment systems are still geared towards accepting card payments. Online payment services, such as PayPal or those that use the ACH networks, still lack connectivity at point-of-sale.
Customers in developed markets are generally averse to having to learn something new and although they might use mobile technology to research products, they tend to buy them online via a desktop computer or laptop, or in-store.
As a result, start-ups are posing a challenge to existing networks to provide both the consumer and corporate markets with more secure, streamlined, and frictionless systems for carrying out transactions.
Person-to-person products (P2P)
Mobile P2P payment products are gaining ground mainly in developing countries – M-PESA in Kenya and GCash in the Philippines, which are both MNO-led initiatives. Contenders to look out for in developed markets include Pingit (UK) or POP money and Square Cash (US).
Mobile point of sale devices (mPOS)
“97% considered that convenience, ease of use and / or speed of payment are essential.”
mPOS systems enable mobile devices to be used for accepting card payments. They are currently regarded as providing the most promising opportunities for mobile commerce.
Wallets must be able to integrate all the stages of a consumer’s purchasing journey, e.g. providing access to social networks and product reviews as well as enabling them to make secure payments.
Many see a lack of a viable business case for mobile payments, together with security concerns and an apprehensive consumer market, as being the three most significant challenges that have to be faced.
Near field communication (NFC) technology is versatile and offers significant opportunities in relation to payments, advertising, marketing and loyalty. It also offers a high level of security. However, it requires specialised hardware on both mobile device and the POS.
Apple and PayPal are supporting BLE to challenge NFC, whereas Google is enabling Host Card Emulation (HCE) in its new KitKat platform which supports NFC.
Innovative applications of QR code-based solutions are also being developed to link the physical world (a consumer’s smart phone in a store) with other devices (a POS terminal) to trigger automatic payments.
Using hybrid models and systems (e.g. HCE with a Trusted Execution Environment (TEE)) are seen as the way forward for increasing security and simplifying payment systems.
Applications are being developed that integrate the payment process into the buying experience, e.g. in the restaurant and bar industry. Uber is now widely used for locating, hiring and paying for taxis.
Mobile and corporate payments
60% of respondents see significant potential for the development and introduction of mobile payments in the corporate market. Another key growth area will be the use of mobile systems for monitoring and controlling travel and other expenses.
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