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Mobile Payments: Trends to Watch
Eden Zoller, Principal Analyst, Ovum Consumer Practice
December 2015
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Technology trends
NFC & the impact of HCE
Biometrics
Bluetooth Low Energy/beacons
The role of wearables in m-commerce
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The NFC story so far: slow progress in most markets
Big push by operators and GSMA, while all major OEMs ship smartphone models that are NFC enabled
Device availability no longer a show stopper -according to the GSMA around 225 phone models are NFC enabled
But outside of a few markets this has not amounted to mass market adoption by consumers or merchants, or significant revenues for service providers
The majority of NFC services are trials, at an early stage and small scale. Of the 150 launches noted by the GSMA only 60 are commercial services
Opposing views over where the secure service element should reside
As much about control over service provisioning, the customer relationship
and business models as it is NFC security architecture
Articulation of the NFC mobile payments proposition to consumers is not
compelling
This resulted in low consumer awareness, adoption and usage of NFC, which
in turn affects merchant willingness to invest in NFC
Has created a classic “chicken and egg” scenario
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But this could be about to change: the impact of HCE
Solutions based on Host Card Emulation (HCE) could give NFC a much needed boost
HCE is a technology built into the device operating system that enables NFC
transactions without the use of a Secure Element (SE) on the device, in preference for
a virtual SE in the cloud. This is a more flexible model for NFC that makes service
provisioning much easier for issuers, developers and other third parties.
Endorsed by Google, Samsung Visa, MasterCard plus a host of platform suppliers
(Gemalto, Sequent) and developers
Layering on tokenization and biometrics provides additional security
HCE has the potential to open up the NFC market to more innovation and competition
But a disruptive for operators as it displaces the SIM centric model they favour
And HCE does not change consumers’ lack of enthusiasm for NFC payments
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Biometrics - a good user experience above and
beyond their ability to add security
Biometrics, including fingerprint and eye scanning and voice
and photo identification, provide a good level of security, but
not necessarily more than a six-digit or dynamic password
The illusion of added security is more important than the
security that biometrics actually bring
Biometrics prove highly challenging in cases of identity theft
There may also be some reluctance from consumers over
privacy concerns
However, biometrics can enhance the payments authorization
process, which can occur via a simple tap, glance, or word.
They can help create new payment experiences while
reducing the risk of forgotten PINs and passwords.
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The role of Bluetooth Low Energy (BLE) beacons
BLE beacons are an appealing solution for m-commerce
Can enable hyper location applications such as geo-fencing
A low power, low cost solution (Estimote sells three beacons @ $99)
that can be set up quickly and easily
Embraced by various players but notably PayPal (PayPal Beacon) and
Apple (iBeacon)
Merchants are actively experimenting
But despite the hype, BLE beacons are not perfect
A device must have its Bluetooth radio turned on; applications must be
configured to support BLE beacons, while users have to download the
beacon application and opt-in to accept beacon notifications
Privacy issues are heightened
Because BLE/beacon solutions require applications, they are arguably
a better solution for larger retailers/brands that already have a popular
application
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Wearable devices as a m-commerce platform
An immature ecosystem that is
generating a lot of heat
Number of wearable
devices is increasing -
Pebble Technology, LG,
Motorola, Samsung ,Sony,
Apple, Google etc.
There could be a case for
wearables for selected m-
commerce applications
The use of a smart watch
for lower value tap and go
mobile proximity payments
in travel and transit
Access control – for
venues, offices
Order tracking
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Wearable devices as a m-commerce platform
When do you plan to buy / upgrade any of
following devices? (response for
wearable devices)
Ovum Consumer Insights Analyser, 2014
But the prospect of wearables
becoming a mainstream
platform for m-commerce is
debatable
Lacks of scale
A challenging environment
for developers - market
fragmentation, new form
factors and usage scenarios
Still viewed as a novelty by
the majority of consumers
Consumers still getting to
the grips with m-commerce
on mobile phones, let alone
wearable devices
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Services
The digital wallet application mix
The role of m-loyalty & rewards
P2P transfers
From location to contextual commerce
The prospects for social commerce
The Apple effect
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In theory, multiple m-commerce applications &
revenue streams
AdvertisingData
Transactions Loyalty
Mobile proximity payments
– e.g. in stores,
restaurants, gas stations
etc
Location -e.g. store locators
& mapping, in-store
navigation, geo-fencing apps
Ticketing - e.g.
concerts, sports
events, travel
Advertising - e.g.
promotions, coupons
Banking & financial
services, e.g. banks
transfers, micro
finance products
Transport - e.g. parking
fees, toll charges.
Identity storage and
management - e.g. ID
cards, gym membership
Access control -
e.g. digital keys
CRM - e.g. Rewards,
digital loyalty cards
Shopping companion
applications - e.g. price
comparisons
Social commerce - e.g.
Payments within
messaging/social media
apps, check ins, bill splitting
Mobile remittances – e.g.
P2P domestic &
international remittances
mobile web payments –
e.g. retail online stores
and similar
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Digital wallet positioning
Starbucks
Cityz
Tukcell
Cüzdan
Dunkin’
Donuts
AliPay
Wallet
SK Smart
Wallet
Apple Pay/
Apple
Passbook
M-Pesa
Portugal
Telecom
MEO/
CardMobili
Wallet
Deutsche
Telekom
MyWallet
3 Citi
WalletGoogle
Wallet/
Android Pay
Loyalty & marketing PaymentsMulti-functional
EcoCash
Airtel MoneySamsung Pay
BMK Express
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The rise of P2P payments – the UK example
Paym. Unprecedented
collaboration among all major
UK banks and building
societies
Links multiple banking P2P
products under one brand
2.5m users as of April 2015.
Total of £44 million in value
over same period. Average
size of transaction £55.
Pingit. Barclays’ very
successful P2P mobile money
transfer service (integrated with
Paym)
3.7m users, £1bn in
transactions since launch
2012
Enhanced with an increasing
array of features
Source: Barclays
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The prospects for social commerce
Respondent’s current usage of
payment related services on social
networks and messaging
applications were, in aggregate,
modest across both emerging and
mature markets.
Just over half of mature market
respondents used none of the
social payment applications but
forward
But this is not altogether surprising
as most payments applications in
the social context are still early
stage. Moreover, the findings
revealed that certain applications are
already starting to gain good
traction, particularly in emerging
markets
Do you use social networks or messaging applications
for any of the following? (Select all that apply)
Source: Ovum Consumer survey, 2015
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From location based commerce to contextual commerce
Related behavioural data
What does a person search for when
browsing?
What is their purchasing behaviour?
What type of venue/outlet did the person
visit?
How often does the person visit the
location?
When did the person visit? (time of day,
days of the week, seasonal)
When did they arrive/leave, how long
was their visit?
Real time location data
Where is a person at this moment?
Related demographic data
What gender and age is the person?
Where do they live?
What is their profession and income
level?
What are their preferences and interests?
What kind of autos/household white
goods do they own?
Geo-behavioural
targeting
Related contextual data
What type of connection does the person have?
What type of devices are they connected to ?
What type of operating system is in use?
What are the local conditions -e.g. weather,
transport status
Contextualization strengthens the use case for mobile payments
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The Apple effect
Apple’s ultimate goal is to take a central role in the payments/digital wallet
ecosystem. It has a well thought through, compelling proposition to drive
this:
Wide support from banks and retailers: over 100 banks and more than
700,000 retail locations
Device based SE gives Apple maximum control
Supports both NFC proximity and remote m-payments – P2P coming
soon
Apple Pay + Passbook = a more fully articulated digital wallet
Harness the location marketing capabilities of iBeacon
Draw on the mobile advertising capabilities of the iAd platform
Quick to open Apple Pay API to developers
High profile retail outlets to promote Apple Pay, educate consumers
Riding the existing payment rails – aiming to get financial institutions on
side
Will prove effective at marketing m-payments, particularly NFC
Emphasis on security and data privacy - biometrics, tokenization,
embedded SE
Transaction data generated by Apple Pay remains with the merchant and
banks
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But how successful has Apple Pay been?
Have you ever tried Apple Pay?
Source: www.pymnts.com, Infoscout
The Apple Pay Adoption
Tracker is a collaborative
effort between PYMNTS
and InfoScout, a consumer
research company.
They survey a statistically
significant group of iPhone
6 and 6 Plus mobile phone
users every quarter to
determine the degree to
which their use of and
interest in Apple Pay is
changing. They began
doing so in November of
2014, 30 days after launch
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The consumer perspective
Selected findings and insights from a new Ovum
bespoke consumer m-commerce survey (2015)
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Unbanked users in emerging market are still falling
through the net
Which of these best describes your use of mobile payments/banking services?
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On-going barriers to adoption persist
Why do you not use a mobile payments/banking service?
Security:
Concerns over sharing
too much personal data
Lack of trust in the
security/technology of
m-payments
Lack of perceived need:
Existing payment
instruments are easier
to use
No benefit in adopting
m-payments
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Current MFS application usage
When it comes to the use of MFS
services today, the foundation
apps still dominate in both
mature and emerging markets:
i.e. checking bank balances,
money transfers and paying
utility bills
Users need to reach a level
of comfort with more basic
services before they will
adopt more complex apps
Usage of more advanced MFS in
the forms of loans savings and
insurance is currently more
modest, at just under a quarter of
respondents in both mature and
emerging markets
Which of the following applications do you currently
use on a regular basis (at least once a quarter)?
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Anticipated change in MFS usage levels
Emerging markets will see the strongest increase in the usage of MFS over the next 12 months.
This is encouraging, and confirms that active users in emerging markets have strong appetite for mobile FS applications.
But in mature markets the majority of users (59%) expect current usage to remain unchanged, while just over a third anticipating increased usage.
Service providers need to stimulate the former user group as otherwise there is a risk that usage will stagnate.
Over the next 12 months will your use of the applications you
selected (in previous question) change?
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Current m-commerce application usage
Which of the following applications do you currently use on a
regular basis (at least once a quarter)?
The findings reveal that users in emerging
markets have a propensity for type of
advanced m-commerce applications more
readily associated with mature markets
This means that emerging market service
providers need to offer m-commerce apps
alongside more established mobile money
services, if they have not done so already.
The most popular m-commerce apps for
emerging market users in the survey were
mobile shopping related (50%) and
navigation (47%)
Airtime top ups are still popular (42%), but
emerging market users are interested in a
whole lot more.
The above trend was common across all
emerging market regions.
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Anticipated change in m-commerce usage levels
Findings for future usage m-
commerce applications a
mirror of for MFS, with
implications as per MFS
i.e. existing emerging market
users have a much stronger
appetite for the take up of
new m-commerce services
over the 12 months
Q18: Over the next 12 months will your use of
the applications you selected (in Q17)
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Views on security among active users (global view )
For just over half active users,
mobile payments are deemed "safe
enough" (51%) with another quarter
deeming m-payments very safe.
Only a small portion view m-
payments as unsafe (12%).
This view was repeated across
the various age segments, and
also those who use simple
services and advanced services
In contrast, for non-users one of the
key reason for not using m-
payments are concerns over
security. This suggests usage of m-
payments increases confidence in
security and removes fear - just as it
did for other "new" payment
instruments when first introduced.
How safe/private do you think your personal information is
when using mobile payments?
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Consumer trust in m-payment service providers
Who do you trust the most to deliver mobile payments/banking services?
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Driving loyalty
No surprise that strong security and data
protection credentials are deemed the
most important factors for increasing
loyalty towards a payments service
provider, in both mature and emerging
markets
The next most valued attributes for
increasing loyalty are rewards for service
usage (33%) and brand trust (32%)
These trends were mirrored across all
regions, mature and emerging markets.
The findings were also aligned across
the different age demographics
This is perhaps more surprising as both
are generic drivers of loyalty, rather than
areas of expertise directly linked to the
provision of mobile payments/FS (i.e.
expertise in FS, wealth building advise,
mobile network expertise, application
development).
What would increase your loyalty towards a mobile
payments/banking service provider?
Global view