Collaboration and education: the key to the future success of the mobile payments sector

James Richards, VP of Mobile at digital banking provider Intelligent Environments

The popularity of the mobile wallet is on the rise across the UK and Europe as more partnerships between network operators and their retail and banking counterparts are forged. One of the most recent of these new partnerships saw MasterCard announce a new deal with the UK’s largest mobile network, EE, to offer its mobile wallet services exclusively to Orange and T-Mobile customers.

This partnership has been widely seen as a shrewd move by the card giant which, like many other service providers is a firm believer that the key to speeding up mobile payments adoption lies with mobile subscribers, of which EE has over 27 million. The relationship is expected to bear fruit in the short term – most likely with the launch of an NFC-enabled mobile payments service for mobile subscribers using EE’s network.

NFC may play a major role in making mobile payments a vital aspect of everyday consumer life.  The technology has been successfully trialled at many high profile events in the UK in recent times, such as this year’s Wireless music festival, where Barclaycard used its sponsorship to roll out contactless wrist bands to festival goers. The ‘PayBands’ allowed revellers to make cashless payments throughout the three day event as well as benefit from other incentives such as fast-track entry and VIP upgrades.

There has also been of course, the London Olympics, which proved a major milestone in the emergence of the technology as a serious competitor to Chip and PIN and cash payments. During the games, over 3,000 NFC enabled terminals were rolled out across venues and shopping centres which encouraged a mass take up never before seen on these shores.

Olympic spectators took to the technology like fish to water. So much so that mass hysteria erupted on Twitter and in the national press when a number of terminals crashed at Wembley stadium during a high profile football match. The complaints and outage generated by this failure, went a long way to proving how far the UK had come as a payments nation. Convenience had clearly become a key factor when it comes to making mobile payments and the existence of a ‘cash only’ system is no longer convenient for many customers.

The importance of collaboration and adhering to customer demand
Although such trials have been successful and are undoubtedly changing the payment landscape in the UK, there is still some way to go before the payments sector becomes truly ‘digital’ and collaboration between numerous sectors will be key to achieving this.

The same can be said of other developed nations, which currently lag behind in mobile payment adoption compared to developing nations. There is a slow response from banks themselves seeking to develop mobile payments services. This is regularly blamed on the need to focus on more pressing regulatory challenges but can also be due to a lack of internal resources – both in terms of budget and personnel.

However, the fact is that a variety of factors need to come together for mobile payments adoption to continue to increase, with standardisation just one important part, and consumer education a second factor.  Events such as The London Olympics and Wireless are both perfect example of educating the masses on the topic of mobile payment technology.

Similar initiatives are also increasingly emerging across the Atlantic, most recently in the form of a new company called Merchant Customer Exchange, formed by a dozen major merchants including  Walmart, Target, 7-Eleven, Best Buy, Publix, Sears, Shell and Sunoco. The aim of this company is to provide an alternative to services like Isis and Google Wallet, both of which are increasingly gaining traction amongst consumers.

Of course, such exclusive agreements do have potential downsides. By limiting themselves to one audience or customer base, retailers and mobile operators are running the risk of missing out on a potential mass market opportunity.

Many though, are taking steps to ensure the reach of their products goes as far as possible. Take mobile operator O2 for example, which has launched its O2 Wallet application to both its existing customer base and non-O2 customers.

If industry partnerships mean that certain services will not be available to all, the fact is that widespread adoption will simply involve a ‘survival of the fittest’ process, where just one or two major providers will be likely to dominate an industry in which there are currently a large number of companies jostling for space.

Putting customers at the centre of the mobile payments space
While factors such as collaboration and the availability of services to a wide audience are important, perhaps the most vital aspect of mobile payments is offering the customer a product that not only meets all their needs and expectations, but goes further and provides value added services to the consumer that will ultimately encourage them to use their mobile wallet. Such a service is not yet fully available, something that was clearly recognised by Apple, when it chose not to integrate NFC technology into the iPhone 5 when it was released last month.

The cost and time that goes into the development of a mobile payments offering is a major undertaking for any well known brand and Apple clearly realises that this needs to be integrated with existing offers to maximise its usefulness to the end user.
Ultimately the mass adoption of mobile payments is still two to three years away. However the continuation of education schemes such as those displayed at the Olympics and Wireless festivals this year will remain vital to the ongoing take up of such services. It’s important to point out too that NFC alone will not be at the centre of the mobile payment revolution, with other payment offerings, such as Pay with Square already gaining popularity with retailers in the US while major retailers such as Starbucks allow their customers to make purchases using QR codes.

Such offerings prove just how important the role of retailers is in the ongoing journey to mainstream mobile payment adoption. The more involved merchants become and the bolder their adoption rates and process, the faster mobile payment processes will become a necessary part of everyday life.