By Maxime de Nanclas, co-founder and COO at Mobeewave
There is no question that ‘pay wars’ are heating up, and will continue to disrupt the traditional financial services business model. The playing field is becoming increasingly crowded with device OEMs, banks, card networks and established as well as start up technology companies, all striving to grow their mobile payment offerings.
This month, more fuel was added to the fire when media reports surfaced about Apple gearing up for a phone to phone payments offering. There was also media speculation that Samsung would add a similar phone to phone payments capability to Samsung Pay to allow consumers to transfer funds to each other’s handsets. Additionally, LG also recently announced its own mobile payments system, LG Pay, adding an additional player to the fight for market dominance.
The move toward enhanced digital wallet capabilities, with the addition of a phone to phone contactless component, reflects a missing piece in the consumer experience and prime market opportunity ripe for the taking by handset vendors.
The UK market has exploded this past year for the contactless payment market. According to The UK Cards Association, as of September 2015 there are a total of 74.5 million contactless cards in use in the UK, a growth of 41% over the year. Not only are cards in circulation, consumers are actually using them; £758.6 million was spent in the UK in the month of September alone using a contactless card, nearly a 200% increase over the year.
From the mobile payments side of the market, the move by OEMs to introduce their own proprietary digital wallets has served to stimulate adoption of mobile payments. Research from Gartner predicts that mobile payment adoption rates will catch on quickly, estimating an annual volume and value increase that will average a 35% growth rate, until 2017. Moreover, by the end of 2015 about approximately 30 million to 32.5 million near field communication (NFC) phones are expected to be used monthly or more regularly to make contactless in-store payments.
Mobile to mobile contactless cards that facilitate transactions at a consumer-to-consumer level would capitalise on both exploding markets, while simultaneously making physical cash obsolete.
Cash still king
Today, cash remains the number one way funds are exchanged from person to person, according to a recent report by Aite Group. However, the idea of a cashless society is quickly becoming an impending reality thanks to the embedded wallet major OEM providers like Apple and Samsung have loaded onto devices.
While this move has increased awareness and adoption for consumers, the lack of holistic cash-out-cash-in wallet experience hinders mass adoption. Cash continues to serve as an instant, proximity and ubiquitous choice for monetary exchanges.
That means that the OEM player first to market with a digital wallet experience that incorporates all the benefits of cash, could dominate the market. A contactless phone to phone payment solution would deliver the full experience on a traditional wallet in digital form. Just like with a physical wallet, users would be able to give money to anyone nearby via NFC’s proximity capabilities, the transaction would be instantaneous.
However, what would truly distinguish a solution of this kind would be open-loop capabilities. Unlike current solutions that require information to be shared when sending money from person to person in a close-loop system, mobile payments that capitalize on secure, encrypted contactless technology to send money ubiquitously could trump cash and dominate the market.
By introducing phone to phone payment to the digital wallet, Apple, Samsung or LG Pay could serve as the vehicle to a truly cashless society, delivering an easy, secure and instant way to conduct daily transactions. Only time will tell who will break out of the pack with such a solution, accelerating adoption and capitalising on a multi-million dollar market.
Mobeewave is a global provider of secure, contactless payment acceptance solutions for the mobile wallet.