MasterCard gives a sanity check to mobile payments

According to extensive new research from MasterCard, it’s still early days for the adoption of mobile payments, although some markets are making progress toward attaining the right mix of market forces and consumer acceptance. The research gives statistical weight to the common perception that whilst mobile payments are certainly coming, they remain very much a niche service at the moment.

The data can be viewed online at MasterCard’s interactive website, as part of its Mobile Payments Readiness Index (MPRI). Using public and proprietary data, as well as original market research, the survey attempts to gauge just how prepared and receptive its sample of 34 countries are for mobile payments. Three types of payment were investigated: person-to-person (P2P), mobile e-commerce, and mobile payments at the point of sale (POS).

To be ready for mobile payments, markets need to achieve a balance of high scores across six components that comprise the Index: environment (economy and scale), infrastructure (telecoms and technology), regulation, financial services, consumer readiness, and mobile commerce clusters (described by the company as the degree of integration and partnering among banks, telcos, and the government).

The survey ranked each country on a scale of zero to 100 (worst to best), and came up with a global average ‘mobile readiness’ score of 33.2. No market achieved even half of the top score , which the company says is proof that there is still work to be done before mobile payments become mainstream. According to MasterCard:

“A score of 60 on the MPRI will indicate that a market has reached the inflection point –the stage at which mobile devices account for an appreciable share of the payments mix. Overall country scores range from 22.4 to 45.6 (Singapore) – a narrow spectrum. No one country is a standout – with the possible exception of Kenya – and no one country has a monopoly on success factors. There is opportunity in every market.”

Singapore’s top ranking is based on its infrastructure, having 100 per cent mobile coverage, 70 per cent Internet penetration and 68 per cent mobile phone penetration, as well as well-developed ICT regulations.

“Paradoxically, it was the great disparity in Kenya’s scores – between consumer readiness and financial services, for example – that drove the market to its leading position. It was precisely the deficiencies in Kenya’s banking, legal, and regulatory systems that created the demand and facilitated the development of P2P payments.”

As expected though, there were regional variations. For example, Canada and the US came close to the top of the global list, largely as a result of high scores in infrastructure and environment. However, the US also has some vulnerabilities, most notably in its consumer readiness scores – like many other developed markets – these skewed towards male and young, and while interest in mobile payments increases with income, it declines with age. So are young males with decent income a broad enough segment to be the catalyst for change? Probably not.

In Europe, the most prosperous and developed countries such as Germany and France did not rank as highly on the Index as did the UK. MasterCard says this is due to the unique profiles and characteristics of their consumer populations. For example, consumers in Germany and Italy are more attachment to cash than others. The research suggests that whilst it’s still early days in Europe, consumer education on the benefits of mobile payments is necessary if they are to take off.

As for which payment types are current most prevalent, in the vast majority of markets, more consumers are currently using mobile payments for m-commerce than for P2P or POS transactions. According to the research, consumers are typically drawn to mobile payments either for access to electronic payments (mainly in developing economies) or the convenience of mobile phone payments (in the developed world).

At the global level, MasterCard says that its MPRI highlights a couple of important global themes that can help all interested mobile payment players orientate themselves as market takes shape. The first is segmentation:

“While each market operates according to its own dynamic, a two- pronged segmentation strategy is beginning to take shape: The affluent and mass segments are seeking convenience, while the underserved are looking for access to electronic payments.”

Partnerships is the other main take-away, with the MPRI showing that the lack of partnerships among companies depressed scores and revealed correlations between the lack of such partnerships and weak or struggling consumer demand. A word of caution though – just because a country has a stable telecoms network, established financial services, and progressive regulation, does not ensure consumer readiness.

“To benefit fully from the MPRI, users ought to look not so much at the individual components, but at how they fit together. Especially revealing in this regard are stark disparities among components, which highlight opportunities to advance the cause of mobile payments globally.”

We will have to see if a country hits MasterCard’s inflection point score of 60, and if it does, will it automatically develop a robust and nation-wide mobile payments system? Or will mobile payments remain – at least in developed economies – as a trendy, value-add service, failing to replace our trusted regular payment methods, such as cash? MasterCard has developed its readiness indicator, but what about an actual need indicator?