The most influential Megatrends set to shape the world through 2030, identified by Euromonitor International, help businesses better anticipate market developments and lead change for their industries.Learn More
The 27th Annual Card Forum and Expo took place in April in Chicago. The emergence of the mobile consumer and the future role of payments in this new environment drove much of the conversation at this three-day conference.
Remote mobile payments in 2014 accounted for nearly 98% of all mobile payments made globally in the 46 markets researched by Euromonitor International. Nevertheless, the mobile payment type that has continued to garner the most attention from industry observers is proximity mobile payments. This type of payment has become the Holy Grail for many in the industry due to the immense benefits that surround a mobile-enabled experience.
While there may be many benefits to participation for all players in the mobile payments ecosystem, from payment providers to merchant to end-consumers, the value add of this new-fangled payment method has not materialized in the minds of many consumers. Truly, the million-dollar question in the industry today remains what it will take to spur consumer adoption of in-person mobile payments.
Andrew Luca, who is a partner of the US payments practice at PwC, spoke at Card Forum about how payments players need to view the payment as the “glue for the consumer experience” instead of the focal point for the entire transaction. “It is important for us to look at the mobile wallet not as a wallet for the replacement of payments, but more for the other use cases it creates,” he explained.
It will be those added benefits around the payment transaction that will drive mobile wallet usage, he argued. One idea he suggested is that payment players need to look at emerging strategies for monetizing and analysing data. He encouraged payment players to consider the data it collects and how it could be monetized in a way that would be beneficial for both parties. For consumers this may translate to better omni-channel integration and increased customer engagement.
Despite having long been considered one of the frontrunner technologies to power mobile payments, not more than two years ago some industry analysts called NFC dead. Over the years, several PayPal executives have said the NFC acronym stood for “Not for commerce” rather than Near Field Communications.
One of the hurdles to the success of NFC-based payments has long been the number of players that needed to come together for such a deployment of this mobile payment type. Any aspiring NFC-based payment system provider would have needed a roster of merchants that had the technology in place, a willing group of consumers that possessed smartphones with NFC capabilities and lastly access to the secure element embedded deep within the handset.
“It was a tough sell for many because of the number of players involved,” said Barry Mosteller, director of research and development at CPI Card Group during one of the panel discussions at Card Forum. “It was a very complex equation and that’s why NFC didn’t get started.”
A technology known as Host arrived on the payments scene three years ago and began to change the approach to how payment credentials could be stored and in the process lessened the reliance on a secure element. HCE enables apps installed on any NFC-enabled handset the ability to communicate directly with contactless payment terminals and emulate both contactless and EMV card transactions. Basically, HCE stores and transmits payment card information via a secure, virtual cloud. Today, this technology is supported on mobile phones using the Android and Blackberry operating systems and has been given a nod for it security features from payment networks like Visa Inc and MasterCard International Inc.
The inability to easily assess the secure elements created unnecessary roadblocks for mobile wallet development because it established the mobile network operators and/or handset manufacturers as the gatekeepers of all NFC-based mobile wallets because one of the two ultimately had control over access to the smartphone’s secure element. For those catering to non-Apple users, HCE gave aspiring mobile wallet providers greater freedom to develop products and, in turn, gave NFC-based mobile payments a much-needed boost.
The future of wearable technology looks bright, according to a recent survey conducted by Euromonitor International in late 2014. Nearly half of the 8,000 global consumers surveyed in December 2014 reported some interest in buying a smartwatch, for example. Of course, if wearables technology is able to ride the wave of consumer enthusiasm these devices may in time have more payment applications.
Jeremy Bornstein, the head of payments innovation for RBC, spoke about the potential adoption of wearable payment technology. Like any other payment method, Bornstein said wearable payments would have to provide the same proof of concept that mobile wallets are still struggling to do. For example, aspiring payment providers would have to demonstrate to consumers, merchants and issuers that wearables payments provide additional benefits over traditional plastic cards. “It is about allowing them to pay when they want to pay,” Bornstein explained.
The value add for wearable payments, Bornstein argued, is likely about more than just increased convenience, adding that the greatest value add, in fact, may be security. “For the first time, we can be certain that the cardholder is the one making the payment,” Bornstein explained.
For example, a Toronto-based start-up called Bionym has developed technology that offers three-factor security authentication using an individual’s unique cardiac rhythm. The Nymi bracelet authenticates the user via the individual’s heartbeat and could be an alternative to older authentication methods, such as keys, passwords or pin-based authentication. The Nymi bracelet has an embedded sensor that recognizes the user’s unique electrocardiogram and is able to communicate that information using Bluetooth technology to other devices, such as a mobile device. Bionym has APIs and SDKs available for developers wanting to explore the intersection of this security authentication method and payments.