The limits of the mobile revolution
IPS delegates disagreed over the future of mobile banking
Senior financial executives have clashed over the extent to which mobile payments technology has failed to reach its potential – and the best way to fix it.
“The jury is still out as to whether mobile payments is the next big thing or not,” said Niklas Bartelt, managing director at Germany’s DZ Bank at the IPS conference in London on Wednesday. “There are a lot of scenarios we are looking at. It could be the next debit card, but it could also be the next electronic purse (which failed).”
DZ Bank is currently partnering with Swedish payments company iZettle, which distributes cheap mini chip-card readers to small-scale merchants. The technology is part of a wave of products that aim to make payments easier, faster, and cheaper. Earlier this month, payments company Kalixa Group launched a set of tools including an mPOS, e-wallet and acceptance kit, which it said would disrupt the global payments market in Europe, the Americas, Asia Pacific and the Middle East.
However, while useful, Bartelt felt that such schemes as iZettle and Kalixa would not change the world. “Contactless technology has not borne fruit as much as some of us had hoped,” he said. “We need to watch customers and what their real problems are.”
These sentiments were echoed by David Birch, director at Consult Hyperion, who said that customers cannot currently purchase a phone that supports mobile payments in the UK – making the whole question of mobile payments irrelevant. Birch added that in a rational world, banks and mobile operators would work together to provide security – but that is not the case today.
“The world we live in has not the slightest shred of cooperation between banks and operators,” he said. “Look at Sixpack in the Netherlands, it didn’t work. That’s why NFC stickers are the future of mobile payments.”
Other participants argued that the debate on mobile payments risked misplacing where the advantage of the new technology actually lies. Instead of focusing on NFC or focusing on replacing more traditional forms of payment, advocates should focus on other ways of finding value, or else the new technology risks failure.
“There needs to be something more to a mobile wallet,” said Steve Ellis, EVP, group of wholesale services at Wells Fargo. “Do you have trouble using cash or debit cards? Nobody has a problem buying anything they want. What we need is to add value. The real promise of a mobile wallet is to create a one-to-one marketing relationship between the retailer and the consumer that is useful to both – that’s what’s valuable.”
According to Ellis, most mobile payments that take place in the US actually consist of users simply using their mobile to access a website and carry out a payment, rather than a proximity payment such as purchasing an item in a store. Echoing concerns voiced earlier by Eimear O’Connor, head of mobile payments product management at Barclays, Ellis called for the creation of new standards to make alternative payment types work effectively and to avoid unnecessary duplication.
“Do I have to go to all my different mobile wallet providers, or can someone aggregate it for me?” he said. “We need to work cooperatively and positively, not to keep people out, but to prevent painful compatibility issues coming up. Mobile payments are a great opportunity – they are much more valuable than cards in getting people away from cash.”
For Dag-Inge Flatraaker, head of group interbank infrastructure and payment systems strategy at Norway’s DNB Bank, the main problem for banks attempting to make use of digital technologies such as mobile payments and the mobile wallet is excessive, onerous and interfering regulation, coupled with uncertainty about the viability of different forms of payment.
“We are hampered by the clashing demands of regulators,” he said. “On the one hand, the EU Commission is pushing banks to help create a digital world, and then on the other the European Directorate General for Competition attacks banks if they try to cooperate. This needs to be fixed, because it doesn’t work. Added to that, we have to try to work out whether NFC will be very important or not. This situation is very unpredictable.”
Despite the limits, Flatraaker added that if banks did not invest in new forms of payments technology, other firms like Google would – and that firms slow to respond risked being left behind.
“Generation Y consumers are used to smartphones, and they expect immediate service,” he said. “Google is in a strong position in payments. They can find partners to do this. Visa and MasterCard can cooperate with anyone if they see it adds value. We are close to the tipping point.”
