Mobile Payments

Mobile Payments: What’s In It For Me?

Mobile payments news this week shows a contrast. In some countries, consumers feel that their lives are changed for the better by mobile and contactless payments, and they perceive added value in paying that way. But, in others, consumers still see little advantage in changing traditional payment methods. This includes a University-town micro-economy near Toronto where a digital currency-based mobile wallet is failing to thrill local millennials.

While mint chocolate chip ice-cream might be the way to a foodie’s heart, MintChip digital currency is not the way to a millennial’s mobile wallet, apparently — at least not in Liberty Village, Toronto. NanoPay is finding that for mobile payments to take off, even among early adopters, using a phone to pay must be much more rewarding and convenient than tapping a card. Meanwhile, consumers in Asia have no such qualms, while the U.S. is mired in cybersecurity anxieties.

South Korea Is Mega Mobile

Korean consumers see no evil in mobile payments. The Bank of Korea reported that in the second quarter of 2016, mobile payments rose by over 53 percent compared to the first quarter, and the daily average of mobile payments increased by 7.2 billion won from the previous quarter.

South Korea has 11 mobile payment services such as KakaoPay, Naver Pay and Samsung Pay, and around 28 million cards were loaded onto users’ smartphones in the second quarter. The statistics get even better as the daily average number of mobile payments increased almost 83 percent to 810,000.

And The Brits Are Already Well On Their Way

The news from the U.K. is that Android mobile users in the U.K. can now use their PayPal accounts for contactless payments. Vodafone is the third-largest mobile operator in the U.K. and has partnered with PayPal to allow contactless payments in over 400,000 restaurants, shops and to pay for transportation. London transportation that accepts Oyster will support mobile payments of up to £30 only, and for larger amounts, users can use Vodafone Pay at retailers, which requires a PIN. Vodafone Pay also accepts Visa and Mastercard as funding sources. Finextra reported that Vodafone Pay can be used even if a handset is powered down because the contactless SIM will automatically connect to the contactless terminal to make the transaction.

Other partnership news includes expanded direct carrier billing in Asia by Spotify thanks to an alliance with Fortumo.  Fortumo has introduced a carrier billing program in Indonesia and the Philippines specifically for Spotify users. According to Andrea Boetti, vice president of global business development at Fortumo, although Asia has the highest growth in online content consumption, digital merchants often have difficulty collecting payments because many consumers do not have a credit card. Carrier billing allows uses to make online payments.

But In the U.S., Apple Needs To Diversify

Retailers like Kohl’s, Walmart and CVS are rolling out their own mobile-payment services and competing with Apple Pay, but it’s not because of overwhelming user adoption of mobile payments.

This increasing competition is steering Apply Pay, which celebrates its two-year anniversary this month, in other directions. Apple Pay, which launched in Russia earlier this month, its tenth country, is assuming other functions of people’s traditional wallets, such as transit cards and loyalty cards.

“You want to get into as many use cases as possible,” said Greg Weed, director of card performance research at Phoenix Marketing International. “The wallet app is ideally suited to self-service types of terminals: gas pumps, vending machines, transit. All of this stuff builds transactions. All of these things build up utility.”

But if Apple gets a small percentage of each of these transactions, it is just a drop in the bucket for Apple with sales of $234 billion in the most recent fiscal year. Although eMarketer predicts that proximity payments, in-store payments by mobile phone, are expected to grow to $210 billion in the U.S. by the year 2019, Apple could be hoping that the new wallet features may also make the iPhone more appealing and help Apple compete with Samsung, not that it needs it when Samsung is imploding while its Galaxy 7s are exploding.

Apple has been making a concerted effort to boost consumers awareness of its payment features and encouraging consumers to use it in stores, apps and, most recently, online. But the big problem for Apple Pay is that users are not convinced that it is a better way to go than the method they currently use. In other words, there is no added value as far as consumers are concerned.

According to and InfoScout, almost 60 percent of people said Apple Pay is just as easy as a card, and almost 60 percent of iPhone users said both methods take about the same time.

But the integration of Apple Pay with rewards and loyalty programs could be the ticket because consumers do find added value there. But Apple needs to be quick. Samsung Pay provides gift cards from Dunkin’ Donuts, and users earn money with its own rewards prepaid card. Alphabet tested a loyalty program, the Tap 10, and Kohl’s launched Kohl’s Pay, which integrates its private-label credit card with its mobile app.

In Japan, commuters, this month, can use Apple Pay to buy railway tickets, which could prove lucrative for Apple. Operator East Japan Railway Company alone served 17.4 million passengers a day in the year that ended in March, and Apple has invested in special chips for its iPhones to support the service. In London too, Apple Pay works on the Underground, buses and trains, and the company is keen to serve Boston, New York and other cities with tap-and-pay mobile services.

Apple does not have its own loyalty programs, it is working with Orange Cash, a mobile app for the French telecom company that uses geo-location to send rewards and offers to users, and with Walgreens and Boots Alliance Inc.

And Cybersecurity Is A Downer

While U.S. consumers aren’t yet fully on board with Apple Pay, the Chinese consumer is merrily using Alipay and WeChat wallets on Apple, LG and Huawei handsets. According to Media and Services UX, (MSX) group at Strategy Analytics, three-quarters of mobile payment users in China do so in physical stores daily. The added value for them is convenience, speed, and discounts, according to PRNewswire.

But security is an ever-present concern. According to Nitesh Patel, Director, Mobile Payment Service (MPS): “The digital wallets of smartphone makers like Apple, Huawei and LG will face a struggle to displace the first mover advantage enjoyed by AliPay and WeChat Pay, which have gained widespread adoption. Both AliPay and WeChat are well positioned as the mobile wallet starts to displace the physical wallet. However, our research continues to show that security remains a key concern for all mobile payment users.”

While the Fed added fuel to the cybersecurity fire today as Kansas City Federal Reserve President Esther George stated that concerns with cybersecurity in U.S. payments networks were undermining public confidence in payments technologies, U.S. businesses are underestimating the problem says a global survey from Plano, Texas-based NTT DATA.

The survey found that three-quarters of consumers said that if they were given a guarantee against monetary fraud it would encourage them to use mobile payments, but only 44 percent of businesses are interested in doing so, which is indicative of something. Companies must do more to ease security concerns for mobile wallet adoption to increase. So how about offering guarantees?

According to Peter Olynick, senior practice lead, Retail Banking, NTT DATA Consulting: “Fear is a powerful inhibitor, and fraud fear is top of mind for many consumers…Consumers are not just worried about losing one or two transactions, they fear having their identity stolen. If financial institutions can mitigate those fears and improve merchant adoption for mobile, we will see consumer adoption rates begin to accelerate.”

And biometrics companies take note, consumers are hungry for sophisticated enhanced security authentication such as facial and iris recognition, but most businesses continue to use traditional technology such as passwords. Less than a third of companies globally currently use, or plan to use, biometrics such as face, iris or voice recognition.

Digital Currency – Millennials Just Aren’t That Into You

In a Toronto university campus-like town called Liberty Village, an experiment is underway among millennials to explore a cashless community. The startup nanoPay is using a digital currency developed by Royal Canadian Mint called MintChip, according to The Star.

The startup wants to compete with Apple Pay, already in Canada, and Samsung and Google if they follow suit by the end of the year, which NanoPay predicts. But NanoPay is challenged by a lot more than user indifference. It lacks brand recognition and requires consumers to take the extra step of transferring Canadian dollars into MintChips.

The startup is integrating loyalty and incentive programs similar to that used by the Starbucks app, which rewards users with loyalty points for loading digital wallets, to persuade customers to convert their cash to cryptocurrency like MintChip.

Consumers can also make free peer-to-peer transfers, such as for those to pay rent or allowance. Peer-to-peer transfers are outpacing merchant use 10-to-one, after “hundreds of thousands” of users across the country downloaded the app, according to NanoPay.

The company is providing incentives for customers to download the app by offering 20 per cent cash back in MintChips, and NanoPay has yet to nail down the revenue model. But it will likely consist of a monthly rate and a fee per transaction, which will be “a fraction of what they are paying today” for credit and debit transactions.

According to NanoPay, since its launch in June, MintChip users have added nearly $200,000 to their accounts and the company has processed almost 10,000 transactions. But merchants at Liberty Village say that payment with MintChip is relatively rare. Only five customers had used the currency at a hardware store, and only 5 percent of purchases at restaurant were made with the digital currency.

Rob Cameron, chief product and marketing officer at payment processor Moneris, said that for mobile payments to ignite, providers must make the case that using a phone to pay is that much more rewarding and convenient than tapping or swiping a card.

Sound familiar?



The pressure on banks to modernize their payments capabilities to support initiatives such as ISO 20022 and instant/real time payments has been exacerbated by the emergence of COVID-19 and the compelling need to quickly scale operations due to the rapid growth of contactless payments, and subsequent increase in digitization. Given this new normal, the need for agility and optimization across the payments processing value chain is imperative.

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