First, any discussion on ‘mobile payments’ needs to start with a explanation of what I mean by it. There are many definitions and types of mobile payment; anything from SMS, to direct mobile, to mobile web, and from NFC to QR can all be labeled a ‘mobile payment’.
However, from my perspective, there are really only two main categories of mobile payment:
1. A mobile device is used in authenticating the individual making the payment, the transaction happens in the background (e.g. e-wallets), and;
2. An application on the mobile device passes the sensitive payment details (e.g. paying with credit card through a web browser)
Clearly 1. is better than 2., as mobile phones will probably never be as secure as we’d like them to be.
Second, I think it must be understood that ‘payments’ in general is NOT about the payment itself, that’s just detail, it’s about the authentication of the individual making the payment. Whether you have a checking account, a line of credit, an e-wallet, etc. as your source of funds, you don’t care how you get to it as long as doing so is safe, convenient, widely available, and value for money.
However, safety and convenience have always been, and will always be, a balance of mutual exclusivity. In other words, the more you have of one, the less you have of the other.
The reasons mobile payments are nowhere near as ubiquitous as credit cards […yet], are myriad and include;
1. Credit cards are familiar to, and used by, a large chunk of the planet. There are approximately 7bn of them out there and they have been around for over 60 years
2. They are very widespread, and the use of them is a well establish process
3. Smartphone use is not as great in some regions as it is in the US / Europe, significantly limiting the available payments functionally
4. Large retail have not adopted them significantly, and the card brands are making things difficult
5. People just don’t trust them yet, and they are more complicated for the ageing portions of our population
However, this will not stop the trend, and these two ‘statistics’ pretty much say it all;
1. The average time it takes to realise you’ve lost a credit card is 11 days, the average time it takes to realise you’ve lost you mobile phone is 4.5 MINUTES.
2. By the end of 2014, there will be more mobile phones in use than there are people on the planet (>7bn).
Unfortunately the transition of the non-cash payments ecosystem to mobile will be from credit cards, which requires the support of the card brands, who, for obvious reasons, are loathe to provide it. Both the PCI DSS and the PA DSS standards stifle innovation by making any form of compliance for mobile payments on Cat 3 mobile devices (phones, tablets etc.) exceedingly difficult, and in some cases, impossible.
I have to assume that once the card brands are ready to roll-out their OWN mobile payment infrastructures, the transition will happen much faster. This must involve alternatives to EMV, and any solution must be scalable, and future-proofed, so they’ll need a couple more years to get themselves sorted.
The card brands employ a lot of VERY smart people, and I have to further assume that there are entire departments dedicated to digging them out of the hole they have spent decades creating. From the physical infrastructure (PEDs, back-end servers, credit cards etc.) to sector dependencies (PSPs, acquirers, service providers etc.) the credit card payment ecosystem is enormous, and enormously complicated. The transition of plastic to mobile will take a long time, but I think the brands have a lot to offer in the space if they decide to play fair.
In the end, mobile applications will rule the day, at least until the next thing comes along. It most certainly won’t take 60 years like the cards-to-mobile transition – and I suspect will involve some sort of implant – but entire fortunes are there for the taking in this space. The functionality, convenience, and yes, even the safety of mobile applications mean that they will be the next big thing. Competition will be massive, which can only benefit the most important factor; the consumer.