2014 is nearing its end and again a lot has happened in the digital space within just 12 short months, particularly in the area of payment. Several new approaches towards mobile money and digital payment have taken to the headlines – most famously Apple with its mobile wallet solution Apple Pay, but also others like Amazon or Facebook had at least a brief appearance in the spotlight. The concept of using your mobile phone for payment is certainly gaining momentum and forecasts on the potential of this new business area are eye-watering (depending on the source, 2015 forecasts on mobile payment transaction values are between USD 670 billion or USD 1 trillion).
So, it’s now about time to raise the critical question: What will 2015 for mobile payment truly bring? Firstly, we need to be aware that mobile payment is just an umbrella term, which covers payment methods across different sales channels (from digital to “real world” customer touch points) as well as various billing methods (e.g. direct carrier billing or prepaid), which have just as much in common as a credit card has with cash payments. We also should not expect to see mobile payment adoption as a global phenomenon which will happen everywhere simultaneously, as it will largely depend on prevailing circumstances. Financial transactions are a sensitive topic for consumers without habitual changes overnight. Still, mobile payment brings many benefits to our everyday-life (mainly centered on convenience), so it is not a question IF, but WHEN mobile payments will finally enter the mainstream of consumer behaviour. Due to a series of current trends, 2015 looks more than promising to become the year of mobile payments:
- User behaviour is changing quickly. Google is predicting that in 2015 mobile devices will already enable two thirds of purchases and will lay the ground for more targeted, personalised offers and as a consequence for an increase in mobile payment. Google might have some business interest that this prediction comes true (with Android dominating the market for mobile operating systems), but also independent sources confirm that consumers are scaling back on the time they spend on their computers in favour of their mobile devices.
- Direct Carrier Billing is still an area of high growth, with DCB service providers venturing into the field of physical-goods-billing. For years now, direct carrier billing transaction values have been growing steadily and DCB is now available from most operators across the globe. The benefits of this payment method for digital stores are obvious, as it is even available to customers who don’t own a credit card or even a bank account. Recently we also saw DCB service providers setting up pilots for the billing of physical goods, for example in the United Kingdom or Singapore. There are still a few hurdles to overcome (high operator fees to name one), but this is certainly an area to watch.
- Apple Pay – here to stay? Apple iPay is already widely available to consumers on an Apple device running iOS 6.0+. At least in the US, Apple managed to get a few recognised brands to support the app from launch, e.g. McDonald’s, Subway, Macy’s, Disney, and others, and it also secured partnerships with three of the four major card issuers. So far, Apple Pay is certainly one of the most promising mobile NFC solutions, however it still has a few challenges to solve before it reaches large market adoption (one of them being to further grow its partner network outside the USA). Still, Apple Pay will certainly be a hot topic in 2015 too.
- Internet and financial giants alike are putting all their weight behind mobile payment. While pro-active consumer demand for NFC solutions might still be limited, you certainly won’t need to worry about the supply side. The majority of traditional payment providers and also digital over-the-top-players have mobile payment solutions high up on their agenda (for example the recent divorce of eBay and PayPal is mainly an effort to focus resources and to capture more of the digital and mobile payments market).
- Mobile Money in the developing world is gaining lots of traction. Mobile financial services are popular in large parts of Africa due to the lower penetration of bank accounts. The most renowned existing service is probably M-Pesa, which is now live in 7 countries and has 16.8 million active users in its country of origin, Kenya, alone. Recent months saw a number of further co-operations between banks and operators emerging, with the plan to launch further financial services in the near feature.
- Expect mobile payments to feature big at Mobile World Congress 2015 (again). Already in 2014 we saw several financial heavyweights like MasterCard or VISA announcing their next steps in the mobile payments ecosystem. In March it will be interesting to find out which new initiatives, co-operations and rivalries emerged over the last few months. Of course we will also be on sight, and will keep you updated about the latest news on Twitter @DIMOCO (you will also be able to visit us at our DIMOCO stand, to discuss with us the latest trends in the mobile payments industry).
Christoph Enzinger is Product Manager for Mobile Payments and Direct Carrier Billing at DIMOCO. In previous roles he was working as Senior Marketing and Product Manager at Vodafone Group and the GSMA, where he was engaging in and organising work groups for operators and players from the authentication and payments ecosystem.