For a long time there have been big forecasts about the growth of mobile payments. Stakeholders in this market range from banks to networks, most of which have tried to accelerate the development of this technology at some point.
At a recent event in London, one company with a vested interest in the adoption of mobile payments – MasterCard – laid out its vision for the future.
‘Rather than the high street dying, it’s getting “mixed up”,’ explained Johan Lindstrom, head of digital commerce, MasterCard Europe. ‘This creates problems for those in the payments industry. It means that we need to move to allow the convergence of physical and digital domains. This ‘blurring of the lines’ as we refer to it internally, reinforces the need to build the services that work in this new world.’
Building the base
With any new type of payment technology, infrastructure is always a major issue. Building the network of terminals needed to facilitate the growth of mobile payments can be a complex and expensive process. Fortunately, in the case of mobile, contactless payment terminals can be used. These have already been rolled out in significant numbers as the number of people using ‘tap-and-pay’ cards has grown.
‘There are two challenges: acceptance and distribution,’ says Lindstrom. ‘Contactless gives us a head start, it’s leading the way, providing a good platform, and it will be essential to this working. Contactless has been a great enabler; it is helping to develop the infrastructure for NFC, which means that mobile payments can be introduced with greater ease.’
The payments provider is aiming for every payment terminal in the UK to have contactless capabilities by 2020. Currently, there are more than one million contactless purchases made in the UK every day, with 18,000 of those transactions coming from newly enabled cards.
Security across it all
When a new payment method is floated, the first questions will nearly always be about security. When you’re pushing a converged set of payment types as MasterCard is, this topic is given even more scrutiny. The firm’s MasterPass system allows customers to use one set of credentials whether they are online or in store. The payment provider claims the all-inclusive solution is designed to serve the needs of the modern consumer.
The technology uses a cloud-based process of authentication, which is one of a number of ways in which mobile payments can be validated. At the moment, there are three dominant methods for authenticating a mobile payment: through a SIM, which is normally controlled by the mobile operator; using technology located in the phone itself, or via the cloud. The success or failure of mobile payments will depend on how well these different platforms work together.
The current drive towards mobile payments is being driven by manufacturers and software company solutions, the most notable being Apple Pay, Samsung Pay and Android Pay. These companies’ platforms exist in the cloud or on the device itself. It’s fundamentally different from the last efforts with mobile payments, which largely came from the SIM-based solutions driven by operators using initiatives such as Weve.
Lindstrom believes that the issue is now being approached on a larger scale in a far more collaborative way: ‘The difference is that Apple, Samsung and Google can scale this to a level that has not been seen previously. Before it was isolated companies working with one another on it, but it wasn’t joined up, and there is more progress still to be made.’
Transport for London’s (TfL) travel network has seen the adoption of a range of new payment methods. The transport system has used its Oyster card ticketing system to pioneer a range of new technologies, driving adoption of technologies such as contactless in the process.
There’s been a number of attempts to use the transport network to develop the adoption of mobile payments. Vodafone and EE both have ‘passes’, which enable customers to use their phones to pay, although usage remains very low. Shashi Verma, Director of Customer Experience at TfL, explained at MasterCard’s event that despite pilots, which suggested that 92% of those who trialled the service would adopt it, the focus on an NFC SIM-based solution had hindered progress. TfL revealed that Apple Pay will be accepted on the network and it is hoping that the new manufacturer-based payment methods will be the catalyst for a widespread adoption of the technology.