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Mobile money: Delivering banking and payments


Paul Stoddart, managing director, strategy and business development, VocaLink



A host of new payments companies combined with rapid growth in smartphone ownership has catapulted the possibility of mobile payments into the consumer conscience. This consumer awareness and curiosity is forcing established banks and retailers alike to assess their mobile offerings, or risk losing ground to newer, more agile competitors. The ‘tipping point’ for mobile payments has been hotly anticipated for a number of consecutive years across the payments industry but has never quite arrived. However, research now suggests that the availability of technology, consumer readiness and pressure from new players could finally lead to widespread adoption of this technology.

This year VocaLink conducted one of the largest ever pieces of research into consumer behaviour and attitudes towards mobile banking and payments. 10,000 adults across the UK provided detailed insights into how they use, how they perceive and ultimately what they desire from m-commerce services.

Although extensive surveys have been run in this space, they have focused largely on end user experience. The VocaLink research focuses not only on consumers, but provides insight into how businesses, banks in particular, are well placed to benefit from the ubiquitous uptake of mobile payments. So what does the future for mobile payments look like? And more importantly, what steps do banks need to take to realise the potential opportunities this technology can bring?

Mobile appetite
The research found that consumers are using mobile technologies more today than ever before. Smartphone ownership in the UK has reached a record level of 60% amongst adults and continues to grow. Furthermore, with almost half of all 45-54 year olds in possession of a smartphone, it is clear that this technology is no longer the preserve of the early adopter Generation Y.

Smartphones are increasingly used to orchestrate our daily lives across a range of activities – financial management is no exception, and has been swept up with the mobile revolution. It is possible to understand the link between smartphone ownership and mobile banking and payments based on how activity increases amongst device owners. 43% of smartphone owners bank on the move, compared to the wider population where this statistic falls to just 27%.

The research reveals that 50% of all consumers are either interested in (30%) or already conducting mobile payments (20%). When looking at interest amongst smartphone owners specifically, the combined percentage reaches 63%. This is broken down into 31% of smartphone users who are already making mobile payments, with the remaining 32% interested in doing so.

In banks we trust
With so many different players trying to claim a slice of the mobile payments pie, it has left the market in a somewhat fragmented state. Telecoms providers, banks, card issuers, handset manufacturers and alternative payment start-ups have created an incredibly congested sector. As our research has highlighted, convenience is the greatest concern and desire of consumers. To date, this convenience has been held back by the number of service propositions available. Each with their own registration process and interface, consumers are faced with a daunting range of options, which can lead to mistrust, as well as detracting from the central attraction of the service – ease of use.
Banks have been challenged continuously in recent years on their trustworthiness and customer service. Our research however, reveals that there is still significant support amongst consumers for banks to provide a universal payments service. 35% of respondents reported that they would be more likely to use mobile payments services if they were provided by their bank. This corroborates recent research into consumer attitudes towards banks from PricewaterhouseCoopers. It would appear that banks, with their centuries of experience are still viewed as the best placed organisations to deliver reliable and secure technology and infrastructure for financial services.

Everyone benefits
With consumers stating their desire to make mobile payments, and a predisposition towards the banks to provide this service, how should banks position themselves? The post crisis bank is still trying to repair its balance sheet and for finance departments, developing and marketing a new mobile payments service is a huge commitment. However our research has identified a number of exciting opportunities for banks if they choose to invest in mobile payments.

With the impending account switching deadline on the horizon, banks’ focus will be firmly on not just attracting, but retaining customers. Mobile payment services are emerging as a valuable platform for banks to increase customer engagement levels, which is in turn proven to boost loyalty and retention. The survey findings suggest that innovation in payments could provide a useful olive branch for banks to improve relationships with customers. 30% of the UK adults interviewed said they would increase their engagement with the bank if they used a mobile payments service from the bank. Of course, satisfied customers represent a business opportunity for driving additional revenue through cross and up-selling. Customers who feel they are receiving good services from their bank are more likely to purchase products from them in the future.

Stepping up to the plate
Technology is forever changing the dynamics of society. With any new innovation there comes the moment where market demand and existing social behaviour combine with the availability of technology to bring about a real and lasting cultural change. VocaLink’s research suggests that we have reached this point of lasting change for mobile payment technology in the UK. The ability to deliver mobile payments via a range of devices (devices that almost saturate the adult population and often dictate our behaviour) supported by strong consumer interest means that all is left for the banks, is to bridge the gap between demand and supply.

Banks should see the value of collaborating in this space. The central database for mobile banking developed for the Payments Council is already one example of how banks can work together to deliver something for a greater cause. The research findings suggest that in 2014, mobile payments will no longer be spread across and defined by a host of alternative solutions, but the predominant and preferred payment method, with our high street banks leading the charge.

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