After Apple Snub, Can This Mobile Payment Method Take Off?
The financial and mobile worlds collided in Barcelona this week at the Mobile World Congress as top names including Samsung, China Mobile, Visa and Mastercard announced deals to enhance the use of mobile payments. But some in the industry believe that the technology at the center of the move to mobile money may fail to take off, meaning the deals could be prove to be a gamble.
Visa and Samsung announced a partnership whereby the device maker's phones are now shipped with a chip that's preloaded with Visa's payment solution. That gives financial institutions a simpler and secure link to Visa accounts on people's handsets, without the need for services (like banks) to create new applications to exchange money.
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VeriFone announced it was offering its mobile payment tools and management to China Mobile and the Bank of China. And Mastercard unveiled Masterpass, its own mobile payments platform.
All three deals, announced in Barcelona, either use or support NFC (near-field communication) technology. Developed over the last five years NFC allows consumers to tap-and-pay for items using a mobile phone.
ABI Research expects 285 million NFC-enabled devices to be shipped in 2013, rising to 1.95 billion in 2017. It also highlighted that nine out of the top ten OEMs (original equipment manufacturers) now have NFC-enabled handsets commercially available.
"When it comes to NFC it is the only global standard that will work around the world. All of these other barcode-based systems, they're all niche-type things that are either local or at best regional in scope," Paul Rasori, senior vice president of global marketing at VeriFone.
Traditionally makers of the hardware used by merchants to accept payment, VeriFone has changed with the times to offer "technology agnostic" mobile solutions for payment. The firm has integrated the Masterpass as an acceptance option and has also partnered with the Google Wallet and Paypal.
"We've been promising NFC for the last five years, and it was always going to be next year, Bill Gajda, global head of Visa Mobile told CNBC.com. "I'm more confident now than ever we're going to see this thing take off during 2015 end of 2014."
Saying NFC is the buzzword at this year's Mobile World Congress would be an understatement. Industry types have been using the technology for all kinds of things, including finding restaurants, exploring the Spanish city, entering venues and paying for items.
But there are still dissenting voices pointing towards a slow uptake in usage. Apple overlooked the NFC enabled chips when shipping its recent iPhone 5 handset.
"Apple's decision to omit an NFC chipset from the iPhone 5 has reduced retailer and brand confidence in the technology, leading to reduced POS (point of sale) rollouts and less NFC campaigns," Juniper Research said in a press release in December.
"This in turn will lead to lower NFC visibility amongst consumers and fewer opportunities to make payments, threatening a cycle of "NFC indifference" in the short term."
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Paypal's President David Marcus is not convinced either.
"The NFC payments debate will slowly die in 2013. Is tapping a phone on a terminal any easier than swiping a credit card? I don't think so – it's not solving a real consumer problem and it's not providing additional value to encourage me (or anyone else for that matter) to change my behavior," he wrote on the company website in December.
NFC is the only global standard, and rumors persist that the next iPhone may decide to use the technology, but Mark Hung at Gartner Research says ultimately "the market will pick a winner".
Juniper also revised its forecasts, with global NFC retail transaction values now expected to reach $110 billion in 2017, significantly below the $180 billion it previously forecast.
"It will only work if all the mobile operators and handset makers are involved," Benedict Evans of consultancy firm Enders Analysis said.
"I'm actually pretty skeptical on NFC, but there is no great expectation of new revenue: rather it is different behavior, perhaps churn reduction and increased loyalty."
Mark Hung, a research director at Gartner Research, told CNBC.com that the firms involved are not having full dependence on this new technology.
"These companies are making a push for NFC, but at the same time they're hedging their bets by supporting alternative technologies as well with other products," he said.
Indeed, there are many alternatives to NFC with mobile wallets, barcodes, conventional SMS, web-based and cloud based payments all vying for attention.
What might not be in question is that money transactions via mobile devices of all kinds is set to grow. Worldwide purchase volume over mobile devices will exceed $1 trillion by 2017, according to IDC Financial Insights.
(Read More: Mobile Giants Forced to Reckon With Emerging Markets)
New statistics on Wednesday from the hosts of the World Mobile Congress, GSMA, were equally positive. A survey identified 30 million active mobile money customers globally in 2012, with more mobile money accounts than bank accounts being used in Kenya, Madagascar, Tanzania and Uganda.
"More than 30 million people undertook 224.2 million transactions totaling $4.6 billion during the month of June 2012 alone. This exceeds the 196.3 million transactions performed by Paypal customers on average each month during (the third quarter) of 2012," GSMA said in a press release.