As you may have already heard, earlier this month Visa announced plans to launch a new “digital wallet” this fall that would allow consumers to pay for goods and services through their mobile phones. It has given us at Sybase pause to think about who the various contenders in the race for mobile payments are and which of them is most likely to reach the finish line first.
Mobile payments are becoming an increasingly desirable sector for retailers, operators and credit card companies such as Visa due to the tremendous opportunity for revenue growth. Visa’s digital wallet will support NFC payment technology and will cover all sorts of payment situations, including e-commerce, mobile commerce, micropayments, social networks and person-to-person payments. They have also reported that a long list of financial institutions have already jumped on board with this yet-to-be-launched payment platform, including US Bank and Royal Bank of Canada.
Google also recently threw its hat into the mobile payments ring. The search giant has embedded radio chips in its Google Nexus S device. It also plans NFC support in future versions of its Android platform and is expected to begin NFC trials in New York and San Francisco soon. However, perhaps the largest mobile payments venture supporting NFC technology has been the joint partnership involving AT&T, T-Mobile and Verizon Wireless.
And what about the big A? Most reporters and industry analysts cannot avoid talking about the future of mobile payments without mentioning where Apple will fit into the mix. At this year’s Mobile World Congress in Barcelona, we issued a survey asking experts and insiders for their views and opinions on the future of mobile payments. The majority of respondents predicted that widespread adoption of mobile payments is still at least two years away and, not surprisingly, respondents said they believe Apple will likely play a crucial role in the longer-range prospects for mobile commerce. Nearly nine out of 10 respondents to our survey (89 percent) believe that Apple will have an important part in driving the successful deployment of mobile payments around the world. This result gels with an assessment made by Software Advice’s ERP Market Analyst Michael Koploy.
According to Mr. Koploy’s recent blog, Apple has revolutionized the way we consume music, mobile applications and media, in general. The next likely step will be for Apple to revolutionize the retail experience. Mr. Koploy believes that Apple will act as a merchant service provider and if they can transform the point of sale experience then consumers will be able to use their iPhone for retail checkout with Apple behind the scenes processing the payments. He concludes:
“Apple will need to release an NFC iPhone, and prepare a merchant services portal. This means that Apple will have to prepare these services well before they announce the device, meshing with new rumors that the iPhone 6, not 5, will be the one with NFC capabilities. Once in place, merchants can accept iPhone transactions, and will pay Apple a processing fee. After they establish this network, Apple can blow the entire industry out of the water, and become a new credit brand à la Visa and Mastercard.”
While Mr. Koploy made some good points and interesting speculations, I don’t fully agree that Apple has the potential to be the “King of Payments” anytime soon.
Most industry experts agree that in order for NFC mobile proximity payments to be a success, there will need to be a much greater deal of cooperation and coordination across all stakeholders. Merchants and retailers need to ensure that they also have a mobile strategy in place and start preparing for mobile payments. This can be as simple as preemptively collecting their customers’ cell phone numbers, and to start to use the mobile channel today with the objective of building consumer confidence.
We at Sybase believe that the U.S. credit and debit terminal infrastructure is already well-established, and many consumers and retailers could find that NFC technology is no easier than swiping their credit card and there is no additional value with the technology. Currently, without a well-developed NFC infrastructure in place, consumers are still making mobile payments with the mobile web, SMS and downloaded applications.
Ultimately, the convenience factor of tapping a phone versus swiping a card is not significant to change user behavior so it remains to be seen if NFC is the way forward. In fact the chief benefit of driving payments from handsets accrues to retailers rather than consumers.
The winner of the race for mobile payments will be the one who is able to find a way of improving remote and proximity payments via mobile, which will, in turn, drive consumer adoption. Regardless of the outcome, NFC will be part of the mobile payment enabling technology mix and will not be the sole solution to push at consumers or to help propel Apple to “King of Payments” status. Long before Mobile NFC plays a role in enabling “Mobile Payments”, it will provide value through mobile coupons and vouchers redemption and enhancing loyalty and customer engagement programs.