By Paul Skeldon, reporting for bobsguide
Banking – and more specifically payments – set this year’s Mobile World Congress, the annual mobile industry jamboree held in Barcelona, on fire. Quite literally. Protesters and students aggrieved at the lack of money and bad economic situation in Spain targeted the event at the turn of the month in mass protests, setting bins alight and causing the mobile industry to have to walk the long way round to and from the MWC show.
But aside from these conflagrations in the street, inside the hallowed confines of the showground – a kind of mobile Nirvana, with trees and fountains and people dressed as Android androids – much of the talk was of mobile payments.
Mobile, banking and payments have spent years dancing round each other, teasing and testing with, to date, little to show for it. Premium rate SMS as a billing tool has carved out a niche among younger users for digital content and TV voting and for, e-hem, ‘premium rate services’ (nudge-nudge, wink-wink), but really using the mobile to pay for things has been a goal rather than an actual achievement for the industry up until now.
But this year’s Mobile World Congress was a riot of announcements and launches around the mobile payment and banking sectors and talk in the keynote presentations at the conference – once the preserve of people talking about backhaul and antennae technology – outlined how this was going to be the mobile industry’s next big thing. Well, next next big thing: m-commerce is currently mobile’s big thing, with its loyalty points, customer data and interaction selling points attracting many adherents.
The cornucopia of announcements around mobile wallets, platforms for mobile wallets, mobile check outs, mobile merchant payment terminal technology and even near field communication (NFC: more of which anon) shows however, how real the zeitgeist around payments, and how it fits into the ecosystem, is. The problem is there is still some standardisation work to do. The plethora of announcements, many of them proprietary, also shows that the mobile payment landscape is a terribly confused and fragmented place right now, with no one really knowing how this is going to play out.
And this is the rub. Until now, success in mobile payments has been confined pretty much to Vodafone’s M-Pesa in Kenya. But there people trust their banks even less than they trust their network operators. In the developed world, where much of the Mobile World Congress payments hyperbole was directed, this isn’t the case. Networks are not trusted to get the money right. How many times have you had to complain about your bill? See what I mean?
With this in mind, the biggest news at the show was meant to be MasterCard’s announcement of all the things it is going to be doing in mobile. Instead, the move was pipped by Vodafone and Visa who have partnered to bring the Visa payment ecosystem to mobile wallets.
Visa Prepaid Mobile
Visa Prepaid Mobile gives the idea of pre-paid mobile wallets an air of security, reliability and that va-va-voom of marketing and scale, which having a big brand name attached to it can make it mass market (and trusted). Partnering with Vodafone means that the service potentially has access to some 40million users worldwide. This is perhaps going to be key to getting consumers in the developed world to start paying using mobile.
But the tie up means much more than that, believe analysts. “In a bid to enable interoperability between mobile money networks, Visa proposes to use its robust settlements system to manage cash-in and cash-out transactions between mobile operators,” says Sheridan Nye, senior analyst at Informa Telecoms & Media. “Vodafone’s decision to launch a prepaid credit card-enabled m-wallet follows a trend among mobile operators that want to offer e-commerce and Point-of-Sale (PoS) payments on phones. Orange and Telefonica-O2 have also launched similar prepaid wallets, as a first step in their NFC payment rollout plans.” Barclaycard, MasterCard and Orange all collaborated last year, for instance, on the QuickTap launch in the UK.
The Visa Prepaid Mobile announcement also adds in good old NFC – making contactless payment possible to make the mobile payment process smooth and – if I am being honest – gimmicky enough to tantalise people into using it.
But the tie up is perhaps more significant than that. “Visa’s announcement has the potential to fill a significant hole in the current payments ecosystem,” says Catherine Haslam, an analyst at Ovum. “A major barrier for many operators is the need to build a relationship with one or several financial institutions in order to offer services. Such negotiations are typically long and complicated and this would replace it with a simple contract with Visa. In effect Visa is doing what it’s been threatening to do for several years and expanding its traditional intermediary role in payments to mobile. The fact that it is also supporting non-Visa payments shows that the payments giant recognises that ubiquity is the key to success in mobile money systems.”
But Visa is not walking into an open market. It faces competition from international financial hub systems, such as the M-wallet and HomeSend services offered by international carrier BICS, and it has barriers it must overcome. Firstly, Visa must establish a viable business model that operators will accept. BICS already has a well-respected model and many existing operator customers. However, Visa’s brand and scale should make this possible, especially if it can offer operators a ‘plug and play’ solution.
A bigger barrier, at least in the short to medium term, is that the system relies on NFC technology in the consumer device and PoS, and that is a long way from critical mass.” The acceptance infrastructure is not yet in place across all countries yet.
Against this backdrop, MasterCard tried to steal the show with an announcement made hours earlier that it and its partners Comviva, Intel, iZettle, Santander and Turkcell were unveiling a vision for the future of mobile payments.
The announcement was, in keeping Mobile World Congress tradition, long on vision, short on substance. The plan includes Wanda, a joint venture between Telefonica and MasterCard designed to provide mobile payments to 87 million Movistar customers in Latin American. These will be linked to a mobile wallet or prepaid account that will allow for money transfers, mobile airtime reload, bill payment and retail purchases, among other services. The mobile wallet and prepaid accounts will be available anytime, anywhere in the world.
MasterCard also flagged up a partnership with BOKU that will enhance the shopping experience for consumers, allowing them to make payments, receive discounts and targeted offers, and monitor spending – all via their mobile phones anywhere MasterCard is accepted. Offered through a mobile subscriber’s mobile network operator (MNO), BOKU Accounts with MasterCard Prepaid gives consumers a convenient way to pay while on the go.
So, with the two major card processing companies teaming up with the two largest mobile phone networks in the world, we can hopefully this year expect big things from mobile payments. But looking at the many other announcements that cover everything from in-app payments for digital goods right through to PoS systems in shops, there still seems to be a long way to go with linking what banks and operators are now planning to roll out and getting merchants to figure out how to integrate it into their businesses.
But perhaps more interesting than this shift to MNOs partnering with card companies for branding, processing and reach, are the myriad other solutions unveiled at the show aimed at facilitating in store and mobile commerce.
This is perhaps where the real hook for mobile payments will come from: the street. While there is much arguing over when NFC will be built into an iPhone or Android handset, or when the Visa network will roll out terminals in all its merchant stores, there is already a groundswell of use of much more simple mobile payment tools that work right now and don’t require any great rethink of either consumer, merchant or banking technology.
Take for example Starbucks. It runs a loyalty scheme in the US that involved putting payment on a card and, as you accrue ‘points’ you get money off, which effectively places credits on the card. The boffins at Starbucks stuck this on an iPhone app at the end of 2010 and throughout 2011, $20million dollars was spent this way and it now accounts for 25% of the coffee giants payments in North America.
The reason it works is that it is simple. You open your app, it tells you how much money you have, generates a barcode, the barista scans it and lo, the money comes out of your account and into Starbuck’s coffers. It is simple, works with existing tech and is part of the brand experience.
Now I am not saying that every store will have its payments apps and you have to keep topping them up and opening them depending on where you are, but what this shows is that you don’t need anything too sophisticated to make this work.
Imagine if you just had a payment app that did exactly what Starbuck’s closed system does for any store connected to your bank account. Everyone who understands apps can use it, any store with scanning equipment can receive it (with some tweaks to the back office and POS, but nothing major) and everyone wins.
Just prior to Mobile World Congress, Barclays Bank in the UK rolled out PingIt, a peer-to-peer (P2P) payment app that effectively associates bank accounts to phone numbers and lets money move between them. The P2P service uses the UK’s Faster Payments Service introduced by VocaLink. In a separate but pertinent announcement a more generic version of a P2P mobile payments service in the UK is planned by the UK Payments Council by the end of the year, which has commissioned VocaLink to build the necessary central database, eventually opening up this capability to more UK banks and building societies. The launch of the Barclays PingIt app is, I believe, the first step towards a truly simple payment application that could, with the wind behind it, usurp all the others.
It will be interesting to see next year at Mobile World Congress 2013 whether (a) Vodafone, Visa et al have moved on with what they started this year and (b) whether there is such a vast array of solutions on offer – PayPal, for instance, has just announced its digital wallet offering at the SXSW show in Austin, USA, after MWC finished as part of an upgrade of its payments product set, suggesting there are many more such mobile and inter-related digital announcements yet to come. The true question is whether something simple has come along by MWC 2013 and sorted it out the chaotic launch of proprietary systems. Like Apple and a mobile payment version of iTunes would be nice.
• Paul Skeldon is a freelance mobile technology journalist, and author a book entitled: The Business Guide to M-Commerce.