Much Ado Behind the Scenes Taking Stock of Mobile Payment

Paying by mobile? Of little concern in everyday life. But behind the scenes various players try to position themselves in this future market. What hurdles need to be passed to achieve critical mass?

Paying services and products by mobile in the real world hasn’t caught on yet – barring exceptions such as e-tickets. We seem to have no pressing need for a new payment method apart from cards and cash. However, this will most likely change with the growing number of digital natives in our society in the near future. Various players are positioning themselves behind the scenes because they identify a profitable business or see their current business model called into question. The key interest in this case are not transaction fees, but, above all, the customers and their data.

Many different players

Mobile payment as part of a wallet solution

The most recent market developments challenge traditional payment transaction providers. Financial institutions would like to continue processing all their customers’ payment transactions, including payments in shops and Web shops. The mobile phone industry also wants to make sure it gets a slice of the cake. The Telco providers are interested in increasing their customers' loyalty and plan to offer mobile payment as an additional service – using the SIM card as secure element to identify the customer. Mobile payment is also a self-evident constituent to the future offer of device manufacturers that, apart from the device, provide the OS, sometimes even a whole ecosystem (e.g., Apple). The same is true for social media and online advertising providers who, by knowing their services‘ users, also know the potential customers. By means of their networks they control a key part of a comprehensive wallet solution already today.

For the retail business, however, mobile payment first of all means an investment in a new infrastructure and possibly additional charges. For these investments to pay off, the new solution has to offer some added value, e.g., by means of functions such as pre-ordering, location-based distribution of vouchers, shopping apps, digital marketing and social media presence.

Who owns the customer?

At present, there is barely any coordination or harmonization in the activities among the different players. It’s too tempting for each provider to offer its own solution, e.g., an electronic debit card as app on the customer's mobile. There‘s the rub. The different mobile payment providers join together on the customer’s mobile. We have an actual market convergence. No user will want to nurse a vast forest of payment apps. So the providers will have to envisage a common solution of which potential approaches exist. But at the end of the day, every one of them will want to control its “own“ customers. However, without cooperation, at least during the initial phase, it will barely be possible to establish overall standards and suitable solutions.

Mobile payment can only work embedded in a comprehensive ecosystem

A mobile payment solution has only a chance when it can be employed extensively. In order to reach critical mass for both the different providers involved and the consumers, the solution has to benefit everybody, first of all also the retailers. As a result, mobile payment as such will not prevail, unless it is part of a comprehensive wallet solution with a wide range of functionalities. Apart from different means of payment (e.g., peer2peer) they include freely selectable financing sources (e.g., different credit cards), loyalty programs (e.g., frequent flyer miles), e-receipts, identities/ID cards and location/navigation.

Success factors for a mobile payment solution

Of course, there are additional success factors: The solution should be attractive regarding customer experience and not depend on one single, but support different technologies; for data transmission, e.g., NFC, QR code, Bluetooth. Further crucial topics are security and device management. There is also sensitivity to anonymity, particularly in Switzerland. Cash remains unrivalled here. The same is true for speed. Mobile payment has to offer its users the same comfort, or some added value.