Posted by John Ginovsky in Making Sense Of It All
Look at a few of the latest hair-raising numbers.
• IE Market Research Corp. surveyed 50,000 mobile users in 50 global markets at the end of last year. Results: “Globally, we are expecting mobile payment revenue to rise from $47.2 billion in 2011 to $998.5 billion in 2016. The compound annual growth rate from 2012 to 2016 will be 83.7%,” says Nizar Assanie, vice president for research. He further says that North America and Western Europe are most ripe “for the beginning stages of a full-fledged adoption of the digital wallet.”
• Juniper Research, separately but fairly closely, predicts the global mobile payments market will be worth $670 billion by 2015, with the top regions affected being North America, the Far East, China, and Western Europe.
• One more: Visa says U.S. financial institutions issued an estimated 1 million Visa-branded EMV chip-enabled cards as of the end of 2011—pretty impressive since there were none just 18 months before. The significance: “Migrating the U.S. market to chip will help build an infrastructure for accepting NFC mobile payments, enhance international acceptance, and reduce fraud,” says Stephanie Ericksen, head of authentication product integration at Visa.
What’s driving this? Mainly it’s the Gen Ys and Gen Xers, says Fiserv in a recent white paper, challengingly titled “Beyond Mobile Banking: It’s Time to Stake the Claim for Mobile Payments.”
Beyond the generational stereotypes, however, another phenomenon is at work, says First Data in its own recent white paper. It discusses a new term—Universal Commerce—that’s at work here. Even though business models like Amazon.com have fundamentally shifted attention to the online commercial channel, it’s also true that the offline channel—traditional bricks-and-mortar stores—have not gone away.
Instead, First Data says, consumers are looking for seamless connections between the online and offline worlds that ultimately give them the most benefit. Online they can avail themselves of social media and messaging platforms that inform them of group buying and daily deals, deal aggregators, mobile apps that locate products and comparison shop, make payments, get coupons and vouchers, and tie their wallets to major recognized brands. Then, through the universal commerce concept, they can interact with the offline world in new and beneficial ways.
“Consumers expect a shopping experience that seamlessly crosses different online and offline channels. Merchants and financial institutions recognize that new players—including deal publishers, alternative payments providers, mobile network operators, and others—are stepping in to provide services their customers want. To compete effectively, merchants and financial services providers need to deliver the kind of connected shopping experiences consumers are creating for themselves,” says First Data.
Lurking behind all this, as was hinted at in Visa’s announcement, is the consumer concern about security. The EMV chip, after all, is widely seen as providing superior protection over current common practices. Even with this, however, banks may have an advantage.
Market Strategies International, in a recent study, found that consumers continue to have concerns about online and mobile security. Banks, however, were deemed the most trustworthy among both smartphone and standard mobile phone users. They were followed in order of trustworthiness by Visa, PayPal, and MasterCard.
“With a well-designed, focused marketing initiative, banks could identify existing customers with the highest propensity to utilize their mobile payment services and market directly to these high-potential prospects. At this time, the banks appear to have a great business opportunity in their own backyards,” says Ann Graham Hannon, vice president at Market Strategies International.
An opportunity, yes, but it’s one banks could let slip if complacency sets in. Fiserv points out banks have at least five advantages to dominate mobile banking: Consumer trust; access to consumer accounts; payments knowledge; necessary infrastructure, technology, and networks; and existing relationships.
“Despite these advantages, or perhaps because of them, financial institutions have yet to assume a leadership position in mobile payments. A degree of complacency among banks and credit unions contributes to a lack of investment in new technologies or services,” Fiserv says.
What to do? Fiserv provides this roadmap:
• Include all four dimensions of mobile payments—bill payments, person-to-person payments, remote retail payments, and merchant point-of-sale payments—in the overall mobile banking strategy. Even if you do not currently plan to support each one, think about how you might want to do so in the future.
• Determine how the existing layers of infrastructure—participant networks, payment networks, information services, functionality, and user interfaces—can be leveraged to facilitate mobile payment deployment.
• Plan to offer the trailblazers of mobile payments, mobile bill pay and P2P, first. Then follow up with support for payments made to remote retailers and at the point of sale.
Says Fiserv: “If they act now, financial institutions can win the mobile payments competition today.”
Or lose it tomorrow if they don’t.
Global Mobile Payment Market Revenues to rise to $998.5 billion in 2016, a CAGR of 83.7%, according to new research report by IE Market Research Corporation
Security Concerns Over Mobile Payments May Give Banks Marketing Advantage with Current Customers
Beyond Mobile Banking: It’s Time to Stake the Claim for Mobile Payments
Universal Commerce: A Seamless, Personalized Purchase Experience for Today’s Connected Consumers
Visa Tops One Million Chip Cards in the U.S.
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