How Can Banks Stay Relevant in the Mobile Payment Era?

Jonathan Duffy, EMEA managing director, Netclearance

Mobile payments are gaining momentum in the UK. 2016 will be the year mobile payments make their mark as this method is expected to increase dramatically. A week after Android Pay launched in the UK, 460,000 payments had been accepted. Google is aggressively marketing it with the recent launch of the Android Pay Day promotion.

 Countries across the globe are increasingly moving towards cashless societies thanks to advances in contactless payments: Instead of carrying a physical wallet with cash and bank cards, mobile wallets are becoming an increasingly popular method of payment. What role will banks play in this new era?

 Mobile first

The number of smartphone users worldwide is predicted to grow to 6.1 billion by 2020 according to the 2015 Mobility Report from Ericsson. With the growth of smartphones across the globe, and the consequential shifting consumer habits, mobile payments are a natural step beyond plastic cards. Smartphones have become an extension of ourselves; they are always on and we always have them with us. They are arguably safer to use than contactless cards for payments for this reason – we notice instantly if we have lost our mobile phone whereas it can take longer to realise we have lost a card.

 Less than half of consumer payments made last year were cash, according to Payments UK, who found that cash made up 45% of payments, compared with 64% in 2005. This number is expected to continue to fall to around 25% by 2025. With millennials being digital-natives and mobile-first, they put online and convenience above physical presence and traditional banking services.

 Mobile payment apps have added a new and convenient way for people to pay for goods and services. The total value of proximity mobile payments is seeing significant growth in 2016 and has the power to revolutionise the shopping experience, making payments more convenient and faster. It is an attractive option for brands and customers alike as it makes the payment journey for the customer much simpler.

 The major technology players from Apple to Google and Samsung are pushing forward with their mobile wallets and banks need to move quickly to avoid being left behind and lose all control of the purchase process.

 Don’t become a dumb pipe

The risk of banks losing market share is very real, especially as the likes of Apple build on their consumer relationships to make further progress into mobile payments. Banks need to innovate and explore ways to retain their brand position and their customers’ loyalty or face becoming side-lined.

 Take Mobile Virtual Network Operators (MVNOs) as an example. In the early 2000s MVNOs had all the influence over their customers. Fast-forward to 2007 and Apple iPhone is launched. Exclusive contracts with operators were signed (AT&T in the US and O2 in the UK) and the operators’ worst nightmare of becoming ‘dumb pipes’ began turning to reality. Gone are the MVNO heydays and Apple is now the brand most synonymous with mobile innovation. The banks could be headed towards the same fate.

 Follow the Nordics

Banks can ward off tech firms and disrupt the industry if they look at innovative ways to use existing technology quickly. There are a few early movers such as Danske Bank in the Nordics which has the MobilePay app, a consumer payment app with 2.9 million active users and an installed base of an estimated 90% of Denmark’s smartphones. Danske Bank is using a phone-agnostic beacon payment technology, based on Netclearance’smBeaconPay, to accept payments at retailers via MobilePay. The payment system has also been rolled out to Norway and Finland and over 90 million transactions were made through MobilePay in 2015.

 Banks can lead the way to cashless societies

Denmark is well on its way to becoming the world’s first cashless society and MobilePay shows that frictionless, tech agnostic and highly secure POS systems are winning the hearts and minds of the customer, and delivering real value to merchants. It is enabling banks to retain or even grow their customer base.

 Mobile payments platforms from banks can provide retailers with an intuitive customer experience via inexpensive technology. Most importantly it removes costly merchant fees as the technology takes transactions directly from the bank to retailers, changing the value chain. Without requiring tokenised card details to be held on a centralised database, the technology is inherently more secure.

 By directly engaging their customers, banks can also create additional brand loyalty as well as providing a desirable feature to entice new customers, both on the retail and the merchant side.

Frictionless first

At its core, mobile payments are about making payments easy and creating a process that is as frictionless and simple as possible whilst also being secure and adding value to the end user. Banks have the ability to provide this through mobile beacon technology and the time is now to start using it in order to stop the tech giants getting there first.

Jonathan Duffy, EMEA managing director, Netclearance

Mobile payments are gaining momentum in the UK. 2016 will be the year mobile payments make their mark as this method is expected to increase dramatically. A week after Android Pay launched in the UK, 460,000 payments had been accepted. Google is aggressively marketing it with the recent launch of the Android Pay Day promotion.

 Countries across the globe are increasingly moving towards cashless societies thanks to advances in contactless payments: Instead of carrying a physical wallet with cash and bank cards, mobile wallets are becoming an increasingly popular method of payment. What role will banks play in this new era?

 Mobile first

The number of smartphone users worldwide is predicted to grow to 6.1 billion by 2020 according to the 2015 Mobility Report from Ericsson. With the growth of smartphones across the globe, and the consequential shifting consumer habits, mobile payments are a natural step beyond plastic cards. Smartphones have become an extension of ourselves; they are always on and we always have them with us. They are arguably safer to use than contactless cards for payments for this reason – we notice instantly if we have lost our mobile phone whereas it can take longer to realise we have lost a card.

 Less than half of consumer payments made last year were cash, according to Payments UK, who found that cash made up 45% of payments, compared with 64% in 2005. This number is expected to continue to fall to around 25% by 2025. With millennials being digital-natives and mobile-first, they put online and convenience above physical presence and traditional banking services.

 Mobile payment apps have added a new and convenient way for people to pay for goods and services. The total value of proximity mobile payments is seeing significant growth in 2016 and has the power to revolutionise the shopping experience, making payments more convenient and faster. It is an attractive option for brands and customers alike as it makes the payment journey for the customer much simpler.

 The major technology players from Apple to Google and Samsung are pushing forward with their mobile wallets and banks need to move quickly to avoid being left behind and lose all control of the purchase process.

 Don’t become a dumb pipe

The risk of banks losing market share is very real, especially as the likes of Apple build on their consumer relationships to make further progress into mobile payments. Banks need to innovate and explore ways to retain their brand position and their customers’ loyalty or face becoming side-lined.

 Take Mobile Virtual Network Operators (MVNOs) as an example. In the early 2000s MVNOs had all the influence over their customers. Fast-forward to 2007 and Apple iPhone is launched. Exclusive contracts with operators were signed (AT&T in the US and O2 in the UK) and the operators’ worst nightmare of becoming ‘dumb pipes’ began turning to reality. Gone are the MVNO heydays and Apple is now the brand most synonymous with mobile innovation. The banks could be headed towards the same fate.

 Follow the Nordics

Banks can ward off tech firms and disrupt the industry if they look at innovative ways to use existing technology quickly. There are a few early movers such as Danske Bank in the Nordics which has the MobilePay app, a consumer payment app with 2.9 million active users and an installed base of an estimated 90% of Denmark’s smartphones. Danske Bank is using a phone-agnostic beacon payment technology, based on Netclearance’smBeaconPay, to accept payments at retailers via MobilePay. The payment system has also been rolled out to Norway and Finland and over 90 million transactions were made through MobilePay in 2015.

 Banks can lead the way to cashless societies

Denmark is well on its way to becoming the world’s first cashless society and MobilePay shows that frictionless, tech agnostic and highly secure POS systems are winning the hearts and minds of the customer, and delivering real value to merchants. It is enabling banks to retain or even grow their customer base.

 Mobile payments platforms from banks can provide retailers with an intuitive customer experience via inexpensive technology. Most importantly it removes costly merchant fees as the technology takes transactions directly from the bank to retailers, changing the value chain. Without requiring tokenised card details to be held on a centralised database, the technology is inherently more secure.

 By directly engaging their customers, banks can also create additional brand loyalty as well as providing a desirable feature to entice new customers, both on the retail and the merchant side.

Frictionless first

At its core, mobile payments are about making payments easy and creating a process that is as frictionless and simple as possible whilst also being secure and adding value to the end user. Banks have the ability to provide this through mobile beacon technology and the time is now to start using it in order to stop the tech giants getting there first.