Visa Europe, IBM and Monitise plan European mobile revolution

Visa Europe, IBM and Monitise plan to revitalise mobile payments in Europe

Visa Europe and its majority-owned mobile money specialist Monitise have signed a deal with IBM in a major mobile banking and mobile payment collaboration targeting Europe’s banks.

The plan is to concentrate the abilities of all three companies, making it easier for banks to help consumers on the high street to shop, bank and transfer funds using their mobile phones. Customers will be able to use applications to manage money in their accounts, payment services to transfer money and pay other people, and transaction services to buy products from retailers both online and in store.

IBM will provide software, technology services and consulting to help power these ambitions. In particular, Visa will use IBM’s smarter commerce portfolio, which is designed to help banks connect with relevant customers through customised marketing. IBM’s cloud application hosting and worklight mobile app development tools will also be used.

“Our collaboration with Monitise will enable us to not only to help Visa and its member banks offer new mobile services but also transform the way that mobile commerce itself is done around the globe,” said Craig Hayman, general manager, IBM Industry Solutions.

Mobile banking and mobile payments have both been a perennial topic in financial services for some years. As early as 2000, Danal was offering mobile payments services in South Korea and today the company estimates that two-thirds of all mobile phone subscribers in the country actively use the service. In Japan, an estimated 70 million people use tap and go mobile phones, and it is possible to pay for public transport, taxis, refreshments, restaurant meals and even accommodation using a mobile.

However, Europe has traditionally lagged behind, both in mobile payments and mobile banking. While 60% of people in the UK currently have a smartphone (and 80% in the 16-24 age bracket), only 20% use their smartphones to make payments, according to research published by VocaLink in May. At the same time, a recent report by ING found that only 35% of UK internet users bank with their mobile devices – a figure that compares unfavourably with some other European countries such as the Netherlands and Spain, which boast 44% each. The biggest user of mobile banking services in Europe is Turkey, where 49% of internet users report using their phones to bank.

Part of the problem has been retailer reluctance to invest in technology they are uncertain customers will use, combined with deadlock between mobile operators and handset manufacturers over where the security for NFC transactions resides and how the profits should be divided. In London, it is possible to purchase coffee using Orange Quick Tap, an NFC mobile payment service developed in collaboration with Barclaycard that works on Samsung Galaxy S III phones. Schemes to roll out contactless payments on London buses, and to extend contactless payment to the London Underground later this year, are slowly making inroads. But according to Alex Kwiatkowski, banking research manager at IDC Financial Insights, perennial problems still hold back mass adoption.

“The ‘chicken and egg’ obstacles to contactless payments at point of sale still remain,” he said. “Retailers will only sanction the mass roll-out/promotion of contactless terminals when customers show demand, and customers will only be interested when terminals become all-pervasive. The industry (banks, operators, device manufacturers) are still debating the best way to deploy payments functionality and have been struggling to agree on a unified strategy for years.”

Despite the historical obstacles, Visa predicts that by 2020 more than half its transactions will be carried out on a mobile device. That view has been given some credence by the flurry of mobile payments activity across Europe in recent months. In July, six Polish banks announced they will collaborate to create a new standard for mobile payments that is expected to reach 70% of banking customers in Poland. Alior Bank, Bank Millennium, Bank Zachodni WBK, BRE Bank, ING Bank and PKO Bank Polski intend to build a common infrastructure including standard authorisation and settlement. The system will be open to all market participants, including other banks, and will support abilities such as mobile cash withdrawal from ATMs and mobile money transfer.

Meanwhile in Spain, Spanish banks La Caixa and Santander have partnered with telecoms firm Telefónica to create a joint venture offering mobile payment services and a digital wallet designed to relegate conventional payment methods to the history books. Users of the new service will be able to gather all their credit cards into the new digital wallet; they will also be able to send and receive funds via their mobile phone. Bank account details will not be necessary; all the sender needs is the recipient’s phone number.

Then in July, a mobile wallet offering built by Kalixa Group that claims to be able to turn just about any phone – including the iPhone – into an NFC payment device launched in the UK, marking the first step in the firm’s plans for Europe-wide NFC mobile payments. There are currently 466 million Visa accounts in Europe, which serves 3,000 member banks across 36 countries.

“Visa recognises the specialist nature of making mobile services intuitive, convenient and relevant to the consumer, as well as meeting the need for interoperability across the scale and diversity of Europe,” said Steve Chambers, chief information officer at Visa Europe. “Visa is committed to making mobile commerce and payments ever easier by connecting consumers, member banks and retail businesses together through the globally trusted Visa network, and by working even more closely with a combined Monitise and IBM team, we are making this vision a reality.”