After all the hype, mobile payments have now taken a back seat with several providers canceling their mobile payment services. This is a strong indication that mobile payments won’t overtake payment cards as early as the market believes.
When mobile proximity payments were introduced just a few years ago, lots of publicity surrounded the topic. At the time media attention kept circling around the new form of payment that would make cash and payment cards “obsolete.” Although this standpoint has merit, it seems the market has been too optimistic about the level of consumer adoption. So far, while cash use has been in decline, payment card use on the other hand has been on the rise. Statistics published by the Reserve Bank of Australia illustrate that cash usage has declined by 8% to A$12.9bn in the five years to the end of 2015, while the credit card transaction value increased by 24% to A$28.4bn and the debit card transaction value by 58% to A$24.7bn. In terms of mobile proximity payments, while the capability and technology are ready for the market, consumers on the other hand are not.
Just in the month of July 2016, Suretap, the Canadian mobile carrier-led mobile NFC payment service, and Semble, a mobile payment service collaboration between banks, telcos, and payment networks in New Zealand, both announced that their mobile payment services are being terminated. Even in the US, Softcard, a telco-led mobile payment system, was sold off to Google early last year, and around the same time Weve in the UK was canned before it was even launched. While these incidents do not necessarily signal the end of mobile payments, they are a clear indication that mobile payments have not done enough to improve the convenience, security, or usability beyond plastic payments.
With the closure of some of the major mobile payment systems that were once the talk of the industry a few years ago, banks are feeling the pressure ease on their business models. Once a disruption to their payment business, mobile payments may now take a back seat for the time being. Although banks are eager to maintain relevance in an ecosystem that a few years ago seemed to have developed beyond their capabilities, what’s happening in the mobile payment space is strongly indicating that payment cards are here to stay.
Essentially, payment cards are not broken and a vast majority of consumers are happy to continue using them. Equally, while mobile payments capability is still a nice-to-have for the vast majority of consumers, they are still not convinced that they need switch to a mobile form factor for all payments. Perhaps markets around the world need to wait until the mobile payments ecosystem can provide the sort of added-value services and convenience that the Alipay Wallet in China offers, for example, to convince consumers, merchants, and all other entities involved to make the final switch.
By Arnie Cho, Senior Consumer Payments Analyst