Mobile payment to be mainstream in four years - report

13 July 2011Mobile payment to be mainstream in four years - report As companies race to take advantage of the mass adoption of smartphones and rapid development of new technologies to offer mobile payment services, executives believe the use of a mobile phone or device to make payments or conduct banking transactions will require four years to become widely accepted by consumers, according to a global survey of business executives by KPMG International, a global network of firms providing audit, tax, and advisory services.

The KPMG survey of nearly 1,000 executives in primarily the financial services, technology, telecommunications, and retail industries globally found that 83% of the respondents believe that mobile payments will be mainstream within four years, compared to only nine percent who see them as mainstream today.
 In fact, 46% believe mobile payments will be mainstream within two years.  

"We believe that exploding smartphone growth and myriad opportunities will grow mobile payments at a much faster rate than our respondents anticipate," said Gary Matuszak, KPMG Global Chair of the Technology, Communication and Entertainment practice.  "A wide variety of payments is ready for adoption, as several key players already provide or are rolling out mobile payments, and interest among consumers in utilizing mobile payments is growing, in line with the industry's readiness to deploy them."

Seventy-two percent of the executives said that mobile payments are now or will be reasonably important in the future, with specialist online systems building on its leading position as a payment method, and m-banking and near field communication (NFC) gaining significantly greater traction than today.  
Fifty-eight percent said they have a mobile payments strategy in place.

"While there is consensus about the significant value of this opportunity among executives across geographies and industries, the type and size of opportunity varies between developed and developing countries depending on depth and reach of the financial infrastructure  in place. We believe that those firms willing to engage in cross-industry partnerships and coopetition are more likely to succeed and dominate the market due to the complex set of business relationships required to deliver mobile payments to a mass market," said Matuszak.

While the majority of the business leaders surveyed believe consumers are currently concerned about security and privacy when using mobile devices,  they believe other factors are  more compelling attributes of a successful mobile payment strategy.  
Specifically, 8% believe convenience/accessibility is the highest attribute, followed by simplicity/ease of use, at 73%, security, at 57%, and low cost, at 43%.  

At the same time, business leaders, globally and in the USA, view security as the main challenge to developing mobile payments strategies.
Technology and adoption of the technology is a distant second, followed by privacy.

"The business leaders understand that when it comes to consumers choosing a provider based on security, reputation can make the difference, and any damage to a business' brand can prove costly, even to the extent of being a showstopper," said Sanjaya Krishna, KPMG US Digital Services Leader in the TCE practice. "As a result, leading businesses are adopting multiple approaches to alleviate customers' privacy and security concerns."

Matuzak added:

"One surprising result of our survey is the absence of divergent views across both industries and geographies, which speaks to the consensus that mobile payment is regarded as an opportunity for players across the value chain of commerce."

With the mobile payments industry poised to make a major leap in the coming years, several players are expected to play significant roles, though two groups of financial institutions are the current front-runners, say respondents.

Banks, which scored the highest in level of importance in the value chain, and credit card companies will have the most important roles, according to business leaders globally.
They placed telecommunications companies third, ahead of specialist online payment players (eg. PayPal, Boku, Obopay), online service provider giants (e.g. Google, Facebook, Amazon), retailers and technology companies.
Among US respondents, online service provider giants placed third, followed by specialist online payment players and telecommunications companies, which were rated of equal importance, retailers and technology companies.

Each of these companies' success can be tied to the prospects for the five current payment methods which are battling for a share of the market.

The KPMG survey respondents, globally and in the USA, see specialist online systems leading the pack, due to the fact that this method already has significantly greater penetration than alternatives, and its penetration is expected to increase.

Respondents said that specialist online systems have the greatest prospect for success, followed by mobile banking, NFC, carrier billing and the "mobile wallet."

"While KPMG believes that these forms of mobile payment will all gain some traction, our view is that M-Wallet is one of the most exciting and promising payment opportunities. M-Wallet provides the momentum to move beyond payments to participate in the entire chain of mobile commerce, from consideration and brand awareness to purchase after-sales loyalty and care," said Tudor Aw, Technology Sector Head, KPMG Europe.

M-wallet – uses mobile device as a wallet with account and transaction information stored on the devices' SIM card.

M-banking – direct access to bank services and information via the mobile device

NFC – short-range (millimeters) wireless communication technology that enables exchange between devices, such as between a cell phone and a point of sale device at a checkout counter.

Specialist Online systems – online payment processing systems such as Google checkout and PayPal.  

Carrier billing – purchases are charged to the mobile phone bill

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Android NFC-equipped smartphones to benefit from PayPal new P2P payment facilities

14 July 2011Android NFC-equipped smartphones to benefit from PayPal new P2P payment facilities PayPal yesterday unveiled a new peer-to-peer payment functionality that allows Google's Android users to pay each other by tapping two near field communication (NFC)-enabled devices together.

The feature, which follows an earlier contactless PayPal payment tool using Bump Technologies, shows how PayPal is gearing up for NFC as part of its larger push on mobile payments.

The payments work through a PayPal widget that allows a user to request or send money.
A user enters the transaction information and then taps their phone up against another phone also equipped with the same app.
After the phones buzz together (picture), the recipient can decide to send or receive money by entering a PIN number.

PayPal’s new mobile payment service will only work currently in the USA with the Samsung Nexus S from network operators Sprint and T-Mobile but will expand to other Android phones that include NFC functionality in the future.

The transactions utilize an encrypted token and don’t access the secure element inside the NFC chip, where payment credentials reside.
It appears this is set up for just peer-t0-peer transfers, which is still a big part of PayPal’s mobile payments business.

The company said it is now on pace to do US$3 billion in mobile payments this year though much of that is person-to-person transfers using the PayPal app, which don’t yield much revenue for PayPal.
Users do not have to pay a transaction fee when payments pull from bank accounts or an existing PayPal balance.

In many ways, this is similar to personal transfers PayPal has previously enabled through its mobile app using Bump Technologies.
Users are able to send money back and forth by bumping their phones together, a solution that doesn’t rely on NFC. 

It’s unclear how much of that may have happened through bump payments, so we don’t know how significant person-to-person NFC payments will be. It’s nice to be able to make a payment to someone by just touching phones but, again, it’s not like many PayPal users don’t have that ability now.

Shimone Samuel, Product Experience Manager for PayPal Mobile, however, said the NFC solution has fewer steps than bump payments and can be activated even when only one person has launched their widget.
Bump payments require both people to have their PayPal mobile app open. He said PayPal turned to NFC because it simplifies P2P payments.

“What I’m looking for is what is simplest and easiest for customers and NFC is the simplest way to request money,” he said.

The bigger opportunity is in enabling real-world payments as retail and local merchants, something PayPal is still set to unveil later this year.
That will be a much bigger deal because it will signal how PayPal will counter moves by Google and its NFC payments initiative, as well as other challengers like Square and the carrier consortium, Isis project.
Samuel declined to comment on how PayPal will use NFC specifically at point of sale but he said the company takes every opportunity to learn from its products.

PayPal needs to figure out how to tap that market for offline purchases, which is much bigger than than pure online transactions where it’s excelled.

So it’s nice that PayPal has enabled some P2P NFC payments, and it’s showing that it’s getting up to speed on NFC.
But we’re still waiting to see the real fireworks.

 

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