Europe’s 4G Lag: Bad For mPayments, Good For Cash

Europe is falling behind in the race to bring fourth-generation technologies to consumers.

Such is the finding of a recent piece by the Wall Street Journal. The report noted that Europe, once a “pioneer in cellphone technology,” now trails Asia and the U.S. in 4G investment and adoption.

In fact, by the end of 2012 the U.S. had 31 million LTE-connected customers, while South Korea had grown to 16 million users. European powers such as the UK and Germany had just 570,000 and 41,000 4G users, respectively.

While the findings may not seem to impact payments directly, slower connection speeds and inferior technology could hamper the development of mobile payments, which is still largely in its infancy as a payments tool.

What else did the report find, and how severely could Europe’s 4G troubles impede mPayments penetration? We take a look in this Data Point.

How Far Has Mighty Europe Fallen?

The WSJ report indicated that while 19 percent of U.S. connections project to be LTE-engaged by the end of 2013, less than 2 percent will be enabled across the European Union. Furthermore, the GSMA reports that U.S. speeds are 75 percent faster than those in the EU.

Such stagnation is in part due to a lull in investment from 2005 to 2009, when annual capital expenditure on telecom infrastructure in Europe dropped 14 percent to €40 billion ($52 billion): equal to just two-thirds of investment levels in the U.S.

What’s Led To The 4G Lag?

European operators are largely blaming regulators for their continent’s 4G deficiencies. The WSJ reports that operators want to build scale through mergers and acquisitions, but that antitrust authorities largely forbid such unions.

In addition to competition, operators blame Europe’s general economic malaise for the lack of investment. This creates somewhat of a Catch-22, however, as 4G investment is what’s needed for Europe’s economy to stay competitive globally. As the report notes, 4G “could also help operators retain customers as they battle to offset falling revenue from people making fewer calls.”

Hidden Impact: Good News For Cash?

As a recent Market Platform Dynamics report noted, mobile payments are largely seen as the greatest threat to the existence and use of cash. However the report, Payments Innovation And The Use Of Cash, also noted that governments and the economy – the two forces cited above as 4G’s biggest impeders – sometimes tip the scale in cash’s favor.

For example, the report cited the economy as a boon for cash use in the U.S. UK, and France, as financial instability tends to drive consumers towards cash use. Poor economic conditions can also prevent merchants and innovators from making investments, just as the European operators claim.

Governments’ effect on cash varies more from state to state. But in the case above, we clearly see one of its effects – regulatory hurdles for mobile payments – supporting the reports conclusion: cash isn’t going anywhere, even in highly developed markets.

To read more from the Wall Street Journal, you can find the full report here. And to view more on cash in Europe, read the MPD report here.

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