The mobile wallet is here. Or so we are always hearing. Whilst we now have a clear idea of the scope of potential mobile payment options (i.e. mobile banking, purchase payment and personal finance management), what is still unclear is why consumers should switch from cash and credit card to mobile payments.
It might be more accurate to say that the mobile wallet race is here. Indeed, with so many players throwing their hats into the ring, all with their eye on cutting their own slice of the payment pie, are we in danger of forgetting the one thing that stands in the way of the mobile wallet revolution - adoption by consumers!
The benefits for each of the key players are obvious. The banks want a share of the annual £trillion credit revenue and the credit card companies want to protect their market share by developing their mobile offering. Then there are the new entrants, such as technology companies and mobile network operators, several of whom have applied for the necessary banking licence. All are keen to get in on the action and take a cut of what is, after all, a very attractive market. The technology and service proposition is developing at a fast rate, which is fantastic news for the consumer. But how will it eventually work in practice, and how secure will it be?
A clear, standardised solution to address these issues has yet to be defined. Each of the players is developing their own route to market, and in such a competitive environment, it is difficult for one solution to gain enough ground to be widely adopted. Near Field Communication (NFC) has been hailed by many as the answer, but only a limited number of smartphones are enabled with this, or any of the other payment options currently available in the market. Likewise, with no standard option available, retailers are reluctant to invest in the infrastructure required to handle mobile payments. With these issues yet to be ironed out, it is perhaps not surprising that, so far, only a very small percentage of consumers have adopted mobile payments.
Security breaches are a major concern for consumers, and potentially a significant stumbling block to widespread adoption. Technology companies insist that mobile payments are 100 per cent secure, but consumers are faced with reports of security failures and web privacy issues, phone theft, and hacking incidents. This information, coupled with the natural fear and reluctance associated with the adoption of any new technology, has paralysed many consumers. To give them a compelling reason to take the leap of faith and open their mobile wallet, rather than use the more trusted alternatives of cash or a credit/debit card, companies must educate consumers on the protection options available.
Research conducted by Assurant Solutions earlier this year revealed that the overall frequency of mobile transactions among current wallet users can be increased by as much as 21 per cent if the transaction is protected or guaranteed, and this figure rises to 36 per cent among current non-adopters. Currently, however, consumers seem unclear as to who will pay for unauthorised transactions on a hacked or stolen smartphone. Mobile device insurance can play a key enabling role here, by providing the vital additional protection necessary to unlock the potential of the mobile wallet for consumers.
The research also highlighted a desire among consumers to transact larger payments of up to £100-£200 using their smartphone. But the current payment systems only permit payments of £20 or less. The higher the payment options available, the more attractive the mWallet proposition becomes to both opportunistic and organised criminals. This is another strand in the dilemma facing all the players in the mobile wallet race. Caps on individual transactions and credit-related payment limits, as are in place with credit cards, may go some way to solving this issue, but again, additional protection in the form of insurance can provide both sides with the confidence to realise the potential of this channel.
The mobile wallet revolution may very well be just around the corner, but currently, the market is heavily segmented, making it difficult for consumers to fully embrace this concept. If this is to change, there needs to be clear standardisation of technology, a clear business model, clear communication as to how it works and what the benefits are over and above those of cash and credit/debit card payments and, perhaps most importantly, a clear message that protection is available to safeguard financial transactions.
Nino Treusch is head of mobile business development at Assurant Solutions Europe