The battle over mobile payments

By David Lowrence | 30 April 2014

As the mobile device landscape continues to change and devices become increasingly attractive for the consumer, it has never been easier to use mobile payments. Consumers are now able to shop and control their money on the move, from virtually any device at any time making mobile payments vital to the nation’s infrastructure and crucial to a bank’s ability to run its business. But as this landscape evolves, there are many different types of companies who are hoping to dominate in the battle over mobile payments and win customers over with their solutions. And due to the current lack of regulation, the market has become a free for all.

Traditionally, most innovations in this area have been dominated by the suppliers within the financial services industry. However, increasingly, these organisations are facing competition from consumer technology giants, including PayPal and Facebook, organisations that have not been historically associated with this space. These big technology companies are trying to dominate the market, spotting the weaknesses in traditional payment infrastructures and transforming them with easier, more efficient technologies.

PayPal, for instance, has demonstrated this by arguing that its infrastructure works faster than traditional technology; allowing users to create an online account and making it easier for them to transfer money.

Facebook, in turn, announced its movement towards the mobile payment market in August 2013, making it easier for its half a billion daily users to make a payment with one simple click from their Facebook page. This product was created to help Facebook’s app partners provide a simpler commerce experience, making it easier for users to make purchases on mobile applications, without the need to log into their online bank account. In addition to this, Facebook has recently announced that it is preparing to join the mobile payments race, by creating a service that will allow users to store money on the social media site, and use it to pay and exchange with others.

But tech consumer brands are not the only big players in the mobile payments space. Banks handle and process large volumes of payments every day, therefore they need to invest in the right technology – one that can ensure reliable and secure payments for its consumers. So, it’s perhaps unsurprising that banks themselves are also looking to develop mobile payment technology and win their customers over. Many banks have created their own applications that speed up and simplify mobile payments, while connecting the user directly to their bank account. One example is Barclays, which has developed Pingit, an app that allows users to make mobile payments simply by using a mobile number.

Another example is an initiative developed by the Payments Council - due to launch later this month, which allows users to transfer money from one bank account to another, without the use of an account number or sort code. Eight financial institutions, representing over 90% of UK current accounts, have already committed to using the service, making mobile payments as easy as paying by cash.

Many traditional suppliers have left it to the newer players to set a standard. But although these new entrants have very good stand-alone systems, when integrating this technology with retailers, it has created confusion.

So what does this mean for those battling over the future of mobile payments?

Increased competition in the sector is always a good thing, forcing the continual evolution of electronic commerce. But as different companies try to battle it out, it is vital for standards to be developed so consumers and retailers can gain a better understanding of mobile payment technology, in order that they can choose a technology which best suits them.

With mobile devices now changing the way consumers use technology, mobile payments will start to revolutionise the way consumers think about how they manage their finances. One of the most important factors in having a mobile payment system is not only its simplicity, but also its reliability. In the end, it doesn’t matter what payment solution consumers or businesses use if that solution cannot ensure the security of their data. Recent research from Fujitsu suggests that 26% of consumers would seriously consider changing their bank if an IT failure rendered online or mobile banking unusable. Because of this, it’s important that the big players in this market not only look to create standards in this market to ensure better simplicity, but also better security. We live in a world where consumers expect the ultimate user experience, and organisations need to be ready to meet this demand.

 

By David Lowrence, Retail Client Engagement Manager, Fujitsu UK & Ireland

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