The Adoption of the Mobile Wallet by: Simona DeFeo & Edmundo Llopis, sentaire Partners, LLC. Mobile smart devices, such as the iPhone, are expected to replace debit and credit cards as the prevalent form of payment. How fast will this transition take place? How will this shift impact the current banking landscape? Rumor and confirmed statements are coming from everywhere. Mobile carriers in the United States such as A&T Wireless, T-Mobile USA, and Verizon Wireless and Apple, a bell-weather for industry change, as well as embedded companies such as Visa and Mastercard are all in the early stages of developing NFC payment system. An NFC payment system (Near Field Communication) is exactly what the name implies. NFC employs an embedded computer chip and radio frequency to exchange transaction details wirelessly with a smart device, leveraging the device’s carrier network capability to process credit or debit transactions via a payment network. Today, most current applications use a card, key fob, or sticker to case the NFC chip. The transition of mobile phones to include our wallet is the next step in this evolution. The forecasts are astounding. According to a 2010 report by IE Market Research Corp, the combined global market for all mobile payments is expected to exceed US$1 trillion by 2014, with over one billion estimated users. Of this, mobile person to person (P2P) money transfers are expected to be one of the fastest growing mobile payments products, with Asia, Africa and Latin America driving adoption. The adoption is rapidly occurring. AT&T, Verizon and T-Mobile have combined with Barclay's and Discover Financial Services to launch Isis, an NFC payment system. Barclaycard, Orange Mobile, and MasterCard have teamed up to develop a mobile solution offering point-of-sale contact-less payment plus P2P funds transfers, mobile ticketing, and loyalty programs, while Sprint and PayPal have created a mobile application that can be downloaded to conduct banking activities and make P2P transfers. On February 2nd, Visa Europe announced the beginning trials of its iPhone NFC system, which allows customers to make contact-less payments. The trial comes as rumors suggest the next version of the iPhone will come built with an NFC chip, along with a new Apple program that will see devices handed out to retailers to accept payments. Visa Europe's program involves attaching a device to an iPhone in order to make NFC payments. Apple’s next evolution could be the “killer app” leveraging this technology will be Apple’s iTunes Store. With over 100 million registered customers, Apple already possesses the customer relationship, know-how, technology and processes to instantly become a major force in the alternative payments industry — Apple will be as disruptive to payments, as they have been to the distribution of music and software. An immediate alternative to NFC technology is the use of QR codes. According to Andy Rubin, Google Executive responsible for Android, there are over 300,000 Android phones being activated daily. Almost all have a camera and are preloaded with a barcode scanner that can be used to initiate all the same types of interactions being supported by the NFC technology. On the merchant side, anyone with a Smartphone, is capable of accepting credit and debit card payments, using Square’s technology and process. Jack Dorsey, creator of Twitter, established Square. Square is an amazingly simple method for a small businesses to instantly become a merchant — literally in a matter of minutes, an individual or company can register to become a merchant and begin accepting payments on Square’s network. The Smartphone enables all customer interactions to be “location stamped” using its geo capability to determine, real time, and the exact location of the device. As the technology evolves, it will be used to capture
biometric information, uniquely identifying the holder of the phone, making the verification process very simple. These two additional aspects make mobile payments an increasingly attractive business proposition for customer centric companies. As the days pass, we will continue to hear stories of new partnerships and evolving models and technologies. The most important question for financial institutions and retailers alike is how will their business model evolve to reflect emerging alternative payment models. This will have the impact of a Tsunami across the industry, clumsy players will be mopping up the dust of more agile and adaptive companies, who are able to develop new products and services, partnerships and retool processes to support this change – including managing a significant amount of employees (i.e. branch managers, store managers, cashiers, processing, etc..) that will be displaced as a result of mass adoption of alternative payment models.
Please contacts sentaire Partners @ info@sentaire.com for additional information on the topic.