Mobile Payments on the Move

Technologies are now in sync with consumer demand.

By Michael Scheibach, Contributing Editor

“Mobile payments will continue to grow in 2018 as they are a perfect product for the times,” writes industry analyst Michael Brown. “Given the rise of cryptocurrencies and the ever-growing shift toward a paperless society, mobile payments fit perfectly into both the present day and whatever financial future one might imagine.”

If Brown is right, mobile payments may finally achieve the impact many have been predicting for the past few years. According to technology innovator Rambus, more than 50 percent of consumers want to use a digital wallet to make faster, more transparent in-store purchases. JPMorgan reports that 41 percent of consumers will actually use a digital wallet this year, and Accenture puts this number at 64 percent by 2020.

As naysayers point out, however, it has been six years since the introduction of host card emulation, or HCE, which greatly simplified the deployment of NFC payment solutions. Yet mobile payments still represent only a small percentage of all transactions. Eighty-one percent of respondents to a survey conducted by the Federal Reserve Bank of Boston had fewer than 5 percent of their customers enrolled and actively using their mobile payment services, with almost two-thirds predicting another two years for 50 percent of consumers to adopt mobile payments.

Today, however, a new wave of technologies is changing the mobile payments landscape. One such technology, context-based payments, may, in fact, all but eliminate the concept of a payment transaction. Google’s hands-free app, for example, allows consumers to complete a transaction by simply saying, “I’ll pay with Google.” Or consider Amazon Go, which allows consumers to select items in a brick-and-mortar store and simply walk out, with the purchases automatically charged to their Amazon account.

On the near horizon are wireless mobile payments. With this technology, consumers will pay wirelessly from their smartphone via Bluetooth, using an RFID chip in their debit card, or automatically by facial or voice recognition. According to a report by the PPRO Group, a technology innovator, this technology will make the transaction seamless “and leave little time for consumers to rethink their purchase.”

It is clear that mobile payments are on the move upward. Within the last year, the Faster Payments Task Force concluded its work; The Clearing House launched its real-time payments system; and NACHA successfully implemented same-day credit and debit services. Banks must pay attention to the rise of mobile payments, and they are.

The Federal Reserve report titled Mobile Banking and Payment Practices of U.S. Financial Institutions indicates that 97 percent of banks surveyed acknowledge that mobile payments are gaining momentum. Sixty-four percent either have introduced or are planning to introduce a mobile wallet, with more than two-thirds partnering with a third-party payment processor or an NFC wallet provider. To overcome concerns about mobile payment security, the majority of banks are focusing on biometrics or tokenization solutions to allay consumer concerns.

To strengthen their position in the payments ecosystem, the report recommends that banks of all sizes develop a comprehensive strategy for mobile banking and mobile payments; build out their marketing and education plans for both mobile banking and payments; strengthen security and risk-management practices; conduct due diligence on mobile payment solutions; and expand mobile banking services to businesses.

“Larger and more innovative FIs are building out their mobile banking product strategies and positioning enhanced services, service delivery options and mobile payments to derive additional value from these services,” reads the report. “While smaller FIs do not have commensurate resources, they still need to craft strategies that will allow them to differentiate their mobile banking and payment services and leverage their own value propositions.”


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