Mobile payments - where are we?

Originally published on Billing Views.

With Mobile World Congress in Barcelona upon us it seems opportune to review the state of play in mobile payments.

Mobile payments is one of those subjects that people have been talking about for ages, however the experience for most consumers is limited to shopping via apps or mobile websites, which is little different to using your laptop, apart from the smaller screen! Where mobile payments starts to get interesting is when your mobile device becomes an enabler to a simpler, frictionless payment experience. That could be sending money to a friend with Barclays Pingit or paying the dishwasher repairman with an iZettle MPOS device. Both experiences remove the need for cheques or for cash. Or that simpler, frictionless payment experience could be something we haven’t yet seen … 

Mobile handset based NFC has been the ‘next thing’ in mobile payments for a while now but has yet to gain traction despite the efforts of the mobile operators with numerous trials and proofs of concept. Handset NFC payments look doomed in my view for two main reasons - using a card for contactless payments is simpler; and without Apple’s support a major chunk of the handset market is out of reach. Apple’s position is still unclear but it now has so many payment components in place that a move into mobile payments can only be a matter of time - iTunes Store credit and debit cards, iCloud Keychain, TouchID, Passbook, iBeacon technology. Whether Apple will make a play in the payments space on its own or in partnership remains to be seen but when they do, it will be disruptive and it will change the market.

Another player who is aiming to disrupt the UK payments market with mobile handset payments is Zapp. Based on the existing banking payments infrastructure and using the bank’s own mobile apps, Zapp is aiming to offer a payment service for both online and customer present payments that operates outside the card scheme payment rails and delivers a secure (because no private consumer payment details are shared with the merchant) and cheaper (for the merchant) payment service. So far, five UK banks have signed up and I expect to see more following. With the backing of major banks and merchant acquirers Zapp stands a good chance of grabbing a piece of the UK payments market.

Digital wallets have been much talked about over the past couple of years and the concept has been stretched to cover a myriad of payment models, however for me a digital wallet provides a stored value account. In their mobile device based incarnations apps like PayPal and Starbucks have enhanced the payment experience but new players like O2 have failed because they didn’t offer the consumer something better.

MPOS schemes that enable card payments via Chip and PIN (like iZettle) or magnetic stripe swipe (like Square) are extending the ability to take card payments to anyone who takes payment face-to-face. With their much lower cost of merchant acquisition these providers have the scope to extend card payment acceptance into markets that historically could never justify the costs.

For me, the most exciting new trend in this space is around managing your entire banking relationship via your mobile phone. No more bank branches, no more phone calls - everything is available via your bank’s app. Moven in New York is pioneering this approach and it will have profound implications for the banks that have built their business on expensive branches.

Consumers don’t use payment products because they 'like paying' but because they provide access to goods or services. The key factor in determining the success of a new mobile payment product is whether it offers a better consumer payments experience than the method it intends to replace.