We pay using the technology at our disposal. Whereas 200 yeas ago we paid with coins, today we use plastic cards. The same plastic cards we’ve been using of 20 years or more. Technology hasn’t really stood still and huge changes are almost upon us.
A 2020 vision
In 2012, mobile devices are omnipresent, three out of ten devices sold are smartphones and a quarter of Belgians already has one. These devices will become the most important touchpoint between consumers and business. Especially when we see that not barely a fifth of this target group carry out searches on their smartphones on a weekly basis, and only 6% shop online. We expect these figures to double by 2020.
With such a high penetration of mobiles, classic forms of payment are under threat. Proton has signalled that it is winding up, most major banks have apps and enable micro-payments via the apps they provide for smartphones.
Will banks still have to keep money in their vaults, or just fresh air? What will their role be in a connected society?
Gravitating away from the centre
The decentralised world brings with it new players. Square isn’t a bank, yet it enables payments through a small terminal which you swipe with your credit card to pay. So small traders can immediately receive universal payments at a much lower cost than that asked by traditional banks. For years, PayPal has enabled online payments for online shoppers. Then we go one step further to virtual cash like Bitcoin which gives virtual goods a value based on how many users want them. Supply and demand in cyberspace.
How we’ll all make mobile payments is still a big question in Europe.
In Japan, Docomo has been selling NFC devices since 2004, which allow you to pay with your smartphone anywhere. You hold it against the terminal, give your payment approval and your purchase is complete. No more coins jangling in your pockets.
In Europe, NFC hasn’t yet made a breakthrough, there’s still a lot of tension between hardware developers like Apple, Samsung and HTC. And sales points will also have to be equipped with the correct terminals.
Research has shown that consumers need a wide network of payment terminals
Mobile payment in three flavours
There are three main types of mobile payment. There’s MCommerce or mobile purchasing, MPayments which carries out mobile transactions, and MWallets which manages mobile finances. We’re now at a crossroads where several major players are trying to lay claim to specific domains. Google is trying to enter the software market, PayPal is now adding to its online software by adding terminals, telcom operators in the USA are launching pilot projects to test NFC technology in their shops
The third world in first place
In developing countries, the attitude is very different. There is a high uptake of mobile payments. These ‘unbanked’ people are not tied to any one bank, but send money to friends and family using texts and USSD technology.
In Kenya, the two big telcom operators have developed the M-Pesa system. It’s very popular with those people who don’t have access to a well developed banking network.
Hunting the mobile consumer
Mobile payments are poised to break through, and the race for the mobile consumer has started. The technology is ready for both local and international players to push their boundaries while consumers wait for a broad application that works for them.
The function of banks will shift from owner to financial facilitator. Mobile and digital shopping will happen. More than ever, the owner of a smartphone is at the centre of things.