Mobile payments: everything to play for

Mobile Payments Outlook (free to download the PDF here) finds that mobile payment services will make a big impact over the next few years but that the field is still wide open from an industry participant's point of view. There's everything to play for.

Smartphones may promote mobile banking by providing a slick interface and near field communications interaction to make the whole thing easy and trendy to use, but in fact the biggest mobile payment impact will probably be felt in emerging markets where the hitherto 'unbanked' are numerous.  Many consumers in these markets will leapfrog from cash to mobile payments in a single bound - partly because a physical banking infrastructure may not exist (or be accessible or affordable for many) and partly because mobile phones have been embraced as THE prefered entry-point to the online world in much of the developing and emerging world.

"In many markets you're not replacing a wallet [with mobile banking] you're replacing a purse, and one of the things that's clear is that payment transactions are going to multiply ten-fold. If you look at the hundreds of billions of very small-scale transactions that take place, if they're all captured digitally then the volume is going to be tremendous," says David Sayer, Global Head of Retail Banking, KPMG, in a TelecomTV interview to discuss the findings.

And the activities that come with that transaction flow may be the most interesting in terms of business models, according to Tudor Aw, KPMG Partner, Information, Communications and Entertainment. "You're no longer just monetising the transaction flow, but potentially you're going to get advertising, the value that may be around customer loyalty, decreasing churn...  you have to start looking at the full value."

One of the most important questions asked in the survey and answered in the report is around industry participants. Who stands to win who will lose in the emerging market?

"We're in baby steps still in most economies as far as mobile payments is concerned. "If you look out in five year's time and think of the penetration and capabilities of smartphones," says Sayer, "It's impossible to conceive a situation where all banks and all customers are not using the mobile phone to make payments of one sort or another."

But, he says, the idea that one category of participants (say, Google or Apple) is going to come into this market and catalyse its development is mistaken.  "One of the things that slows this whole process up is the fear of participants that they're going to be utterly disintermediated from their customers...  If players in this field think they're NOT being disintermediated, then that will be a real prompt to action."

"One of the key things about our survey was that before there's even been a disaster security is the number one issue by a considerable margin.. [ensuring end-to-end security] on mobile phones is going to be absolutely key,"  says Sayer.

See studio interview with KPMG partners on mobile payments and the survey, below.