Mobile Commerce

Who Will Shift The Mobile Payments Pendulum?

Wearable payments and mobile payments. They're the hottest thing since … well, the last hottest thing. The market is still full of lofty projections and lots of aspirations, but no one has quite made a run to the finish line. 

It’s everyone’s game for now.

As Samsung and Apple vie for their piece of the mobile payments pie — both on the wrist and the smartphone — Swatch has managed to ruffle some feathers in the tech community as it snuck its way into China's mobile payments market by securing a deal with China Union Pay that would allow its latest smartwatch (which looks more like a watch and less like a techie timepiece) to be used for in-store mobile payments.


The Switzerland-based company also indicated that it has already made plans to team with Bank of Communications Co. to push this initiative forward at one of China's largest banks.

Perhaps the best selling point for Swatch is that this NFC payments-enabled smartwatch doesn't cost nearly as much as any smartwatch on the market. At a retail price of 580 yuan (about $91), that's hundreds below what both Samsung and Apple offer in the wearable payments market.

Plus, it looks like a regular watch.

But the race to win over Chinese consumers with wearable payments devices isn't limited to Swatch, Apple and Samsung. Alibaba is also reportedly creating deals with watchmakers to make it so Alipay can get its share of the smartwatch payments market, too.

And there are plenty of other wearable pay players that have yet to make a dent in the market. Barclays has bPay, which has been relatively quiet in the headlines since it launches in July. And then there's American Express and its Jawbone deal, which hasn’t quite made its way into the market, but has a NFC payments band in the mix, too.

So what motivates a company like Swatch to be part of the mobile payment race? Perhaps it's the ability to fill a market niche with a cheaper option that still acts as a functional watch. And getting the backing of China's Union Pay doesn't hurt, since that mobile-driven population is projected to set the tone for mobile payments adoption.

“It is important for Swatch to have its own version of the ‘smartwatch,’ as Apple and other technology companies seek to build beachheads on the left wrist,” Luca Solca, an analyst at Exane BNP Paribas, told Bloomberg this week. “This is one game for Swatch in a match which is clearly not over.”

[bctt tweet="What motivates a company like Swatch to be part of the mobile payment race?"]

Apple and Samsung's payment-capable smartwatches (Apple Watch and Samsung Gear S2) have all the functionality to take off in major mobile payments markets, but not being connected to the consumer base or supported in China is a real hurdle for the tech companies to overcome.

Reports in 2015 had pegged it as the year that “wearables really take off.” Of course, we’ve been hearing that now for the last decade about mobile payments and they have yet to do so, despite the many players in the market.

One forecast from Tractica estimates that the wearables market will grow to 187.2 million units by 2020, resulting in a 34-percent growth rate for wearable devices over the 17 million units sold in 2013. Smartwatches, they predict, will outpace fitness trackers during the same five-year time period studied. 

I guess we'll have to wait and see.

But China's market sheds some light into the market and why so many companies are rushing to get on their shelves.

Figures from China's Central Bank show that China's mobile payments transactions grew an astonishing 134 percent in 2014, reaching $3.6 trillion. To put that into context, Forrester projects that mobile payments in the U.S. are expected to reach $142 billion in volume by 2019.

Yes, we're talking trillions, not billions. Comparing China's mobile payments market to the U.S. market is almost like oranges to Apples. Moreover, estimates from China's analysts in the market say that smartwatch makers have sold a million devices in China. And that's why the focus has been getting a share of China's mobile payments dollars.

Interestingly enough, China is also one of the world's largest watch markets in terms of sales. Solca said that Chinese consumers, on average, make up for about 50 percent of the world's watch sales in terms of overall value.

[bctt tweet="Comparing China's mobile payments market to the U.S. market is almost like oranges to Apples"]

Ben Cavender, a senior analyst at Shanghai-based consultancy China Market Research Group, told The WSJ: "watches are still absolutely a status symbol in China." And in a mobile payments hotbed, it would make sense why smartwatches would be the obvious market for Swatch and the major global tech companies to market toward.

Another way Swatch may stand out in the wearable payments market is how it protects consumer data. In a news briefing about the launch, Swatch CEO Nick Hayek noted: "We don't want to connect to a cloud," which is notably different than Apple's devices. Instead, Hayek said the company wants to avoid its smartwatches being reliant on the Internet for payments security, and it doesn't want to have to rely on electricity to keep those watches ticking.

That means no Wi-Fi, no Bluetooth and no Internet. And it could be protecting consumer data better.

Sounds like Swatch's foray into the wearable payments market is making their watch a little dumber, but still having one key component that will draw mobile-loving consumers to pick one up: wearable payments.

Are less bells and whistles the key to breaking into the wearable payments market? The U.S. will get to find out soon after it launches in China — which, for now, is slated for January 2016.

What Else Is Happening In The Mobile Pay World?

Is Mobile Pay Alive And Well In The U.K.?

A new study from TSYS shows why so much of the mobile payments market is being pushed in the U.K. In its inaugural U.K. M-Payments Consumer research report, it concludes that consumers in the region record high satisfaction when it comes to mobile payments.

In fact, 73 percent of respondents say they are likely to use mobile payments for in-store purchases in the next two years. A third of all respondents said they have made a mobile payment in the past three months and were pleased with the experience. Those same consumers also said they expect mobile payments to be an "integral part of their shopping experience in just two years." 

The results also revealed that mobile banking apps serve as a popular trend among all consumers and are no longer reserved for the "digital natives" era. 

The survey, which took into account more than 500 U.K. adult consumers, all had smartphones and had at least one debit or credit card. 

“With the proliferation of new payment choices and the ever-increasing adoption of mobile wallets, U.K. consumers now have more payment options than ever before,” said John Goodale, group executive, product and market development, TSYS International. “In line with TSYS’ belief of ‘People- Centered Payments,’ this primary research focuses on the end-user of these new technologies — the consumer — and highlights some important changes in perceptions which will prove of interest for payments industry players in the future.”

The key findings of the survey showed that security is top of mind for consumers when it comes to mobile payments adoption. Consumers trust financial institutions more than any other type of organization to protect their information. 

But one surprise that came out of the survey had to do with what consumers think about mobile payments adoption and security. Of those surveyed, 54 percent of respondents said they do not think that security is a benefit of mobile payments in-store. More importantly, more than 87 percent of respondents expressed interest in using mobile payments technology if security and fraud protection were guaranteed.

And, volume is thin. According to the U.K. Payments Council, contactless payments accounts for one-fifth of 1 percent of all volume in the U.K. – and that is mostly from cards. Coffee shops and transit represent huge use cases, with the average transaction value under $10. Contactless transaction limits and lack of smartphones with NFC capabilities are to blame.

"What's GPay," You Say?

Hello, GPay. Wait, is Google about to launch another mobile payments product?

Nope. The G stands for LG Payments, and is the latest – and somewhat unlikely — candidate to prep a mobile payments service in the already crowded ring of mobile pay players. At least that's what the rumors are saying. And from the looks of a recently filed patent, LG wants its slice of the mobile payment pie, too. 

According to a filing with the U.S. Trademark and Patent Office, LG has filed a patent for its mobile payments service, which is named in the application as GPay. That name is specifically listed in categories that relate to smartphones, smartwatches, mobile devices and data transmission. LG is reportedly working with financial services in South Korea to bring the service to market.

GPay has already gained plenty of press, but LG has yet to release a statement on the possible mobile payments service. This move from LG comes not long after Google rolled out Android Pay and Samsung rolled out its own flagship mobile payments app, Samsung Pay.

What’s interesting about LG’s potential debut into the mobile “Pay Players” space is the fact that mobile payments haven’t quite taken off yet in terms of consumer adoption — or even widespread merchant acceptance. But that hasn’t stopped startups and larger companies like LG from wanting to join the race, it seems.

But as more players join the mobile payments industry, perhaps that will motivate consumers to think more about ditching their wallets for phones and motivating merchants to accept contactless payments. Only time will tell, particularly as those vying for a piece of the mobile payments pie push out their pitches for mobile payments use cases.

Capital One's Mobile Payments Innovation

Capital One’s slogan might soon change from “What’s in your wallet” to “Whats in your mobile wallet.” 

This week, Capital One joined the rank of payments innovators with the launch of Capital One Wallet, which made it the first U.S. bank to enable contactless mobile payments in its mobile app. 

Through the use of MasterCard Digital Enablement Service (MDES) and Visa Token Service (VTS) platforms, the mobile app is deigned to offer Capital One customers with Android phones a better, faster way to both bank and pay. The app uses NFC to transmit a secure payment token at the point of sale. The app also offers spending management tools, real-time notifications, instant rewards redemption options, and quick access to balance and transaction history.

"A digital wallet is a natural extension of the trusted relationship a consumer has with their bank. We are pleased to partner with Capital One to enable their digital wallet through MDES, and to deliver new capabilities that maintain the service and security their MasterCard cardholders have come to expect," said Ed McLaughlin, Chief Emerging Payments Officer at MasterCard. "Capital One's digital solution creates a seamless consumer experience and delivers a compelling payment choice for their customers."

“In the U.S., consumers now have more options than ever to pay with mobile devices at the point of sale – whether it is in a taxi, store, coffee shop or at the gas station,” said Jim McCarthy, Executive Vice President, Innovation and Strategic Partnerships at Visa Inc. “Visa Token Service  gives Capital One customers the peace of mind to pay safely and conveniently with just a tap wherever they are in the world.”



The September 2020 Leveraging The Digital Banking Shift Study, PYMNTS examines consumers’ growing use of online and mobile tools to open and manage accounts as well as the factors that are paramount in building and maintaining trust in the current economic environment. The report is based on a survey of nearly 2,200 account-holding U.S. consumers.