The year m-payment will take off...

“This is the year mobile payments will take off… Really!” Really? We hear this pitch every year, but we have yet to see actual take up reach the levels forecasted for the last five to ten years. 

Maybe it’s time to evaluate the actual benefits of mobile payments to merchants and consumers, and which forces are driving adoption forward – and also those holding it back. This applies both to proximity payments and remote payments. 

There are literally hundreds of European companies claiming to be in the mobile payments business (whatever they mean by mobile payments, another story.), but most evidence we've seen points in the direction of gradual evolution rather than an overnight revolution. 

In the end it all boils down to actual benefits for consumers and merchants from adopting mobile solutions compared to their existing options. Mobile has to be cheaper, faster, easier, more accessible – and/or just as secure as a bank/card transaction. Ideally, mobile payments should give consumers something extra on top – like a discount, coupon or gift card. If not, what incentive do they really have to switch habits? 

Mobile Payment Devices

Square has paved the way for a new category of mobile card acceptance devices. These devices, which typically plug into a smart phone or tablet, enable consumers and small merchants to accept card payments. New entrants are popping up with increasingly smarter solutions, and many banks are wondering what is going on and how to respond. 

The number of companies offering devices to transform a smart phone into a card acceptance device is increasing rapidly in the US and across Europe. Square, Intuit, iZettle, PayPal, mPowa, Elavon, SumUp, ChipCap, and a handful of other companies all apparently want a piece of the pie that acquirers have previously ignored. 

As per June 2012, Square has enabled no less than two million individuals, small businesses, NGOs etc. to accept card payments. These segments that could previously not justify the cost of buying or renting a payment terminal with an acquiring agreement are willing to pay a merchant service fee of around 2.75% as long as the card acceptance device is free or low cost to obtain. 

In its simplest form, the card acceptance device is a small card reader that plugs into one of the ports on the smart phone or tablet (e.g. microphone jack or USB), or it can connect via Bluetooth or NFC. The user interface is delivered through an app downloaded typically through App Store or Google Play (for iPhone and Android-based phones respectively). Often the app supports manual card detail entry in the absence of a card reader, i.e. a CNP transaction, which also entails a higher merchant service fee (typically 3.5% + a fixed fee). US-based companies tend to only support magstripe transactions, whereas European ones either support chip or both. 

The majority of solutions involve the cardholder signing with his finger, i.e. signature. However, this appears to be a perceived issue with Visa Europe. Earlier this summer, iZettle which uses Chip + Signature was no longer allowed to handle Visa transactions outside Sweden. The reason provided was that the iZettle reader did not fulfill the Visa requirements for payment devices. SumUp, one of the latest entrants, claims to circumvent this issue by sending Visa cardholders a text message with a secure link, which they have to access to manually enter their full card numbers (which sounds highly cumbersome and probably is). (...)

This article is an extract from MACAW Card Bulletin #51. To access the full article and subscribe to the MACAW Card Bulletin, please contact sales@macawresearch.com. 

Mobile and online what?

MACAW is often asked about our opinions on online banking, mobile banking, mobile payments and digital wallets. Some people even use this industry jargon interchangeably to much confusion. So we always ask what people mean by these terms, and if they don’t know what to answer, we ask more specific questions. More often than not, people struggle to define what they are actually asking about. Maybe not so strange given the complexity of current day payments, so why not clean up the terminology a bit to reflect how the world is changing?

For example, is accessing your online banking facility through a mobile web browser defined as mobile or online banking (or both?). What if you substitute a mobile with another device such as an iPad? Is the term mobile payments reserved for non-bank payments conducted via mobile; what about remote vs. proximity payments; or whether or not the transaction involves a card account? See – it quickly gets complicated. Hence there is a need to define a common industry terminology, and that’s our goal. Let's begin with online banking and mobile banking.

The term online banking certainly made sense when it was introduced, and the browser on the computer was the only mode of access to the internet banking facility. But you can also access the online banking facility with a web browser on a mobile or other device. Is that mobile banking? Not in our book. A browser is a channel or mode of access irrespective of device. Redefining online banking as 'browser banking' is historically and technically accurate. Why retain an old world term when we can use the more precise term ‘browser banking’ which leaves less confusion?

Similarly we suggest replacing or supplementing the term mobile banking, which two device specific channels, SMS and Apps, are no longer reserved for mobile phones. These modes of access are available via other devices such as an iPad. Thus MACAW would suggest a channel-based rather than device-oriented terminology. We can substitute the term mobile banking with ‘SMS banking’ and ‘App banking’ to help clear up the confusion.

So let's abandon online and mobile banking in favor of browser, SMS and App-based banking. A channel/access mode approach removes some confusion and is device neutral.

Nordic Card Trends & Opportunities 2011-2012

Nordic Card Trends & Opportunities 2011-2012 is the anticipated sequel to our previous report in the Nordic Card Trends & Opportunities series published two years ago. Much has happened in the dynamic Nordic payments space in the economic downturn and recovery phases; and many new possibilities have opened up.

http://www.macawresearch.com/Reports/NordicCardTrendsAndOpportunities20112012_infopack.pdf

The report describes the development of the credit and debit card markets over the last three years and predicts the debit and credit spend values for 2011-2012 for Denmark, Finland, Norway and Sweden utilizing a historically accurate statistical model based on card payments and economic indicators.

Next, the report assesses the potential of the emerging Nordic prepaid card sector, including drivers and inhibitors to growth, and the size of the current market potential for both closed and open loop products. Nine different prepaid categories are assessed: Consumer gifting, Government disbursements, Corporate incentives & benefits, Payroll, FX & Travel, Fuel, Transportation, Remittance, and General purpose reloadable products.

Finally, the report presents 12 Trend articles, each which explores new card trends and opportunities in the Nordics. The topics revolve around modern card portfolio optimization, new prepaid channels and segments, social media and payments (including Facebook), mobile and contactless payments, and credit and debit trends including loyalty points and cash back. The articles are backed by facts, professional views and case studies.

For those readers who want additional information on a given topic, references to online resources such as blog posts, news articles, press releases, company websites and financial reports are provided.

We think you will enjoy the report and that it will help you see new ways to improve your business and tap into new revenue streams in an increasingly competitive card market.

Questions and sales orders can be directed to sales@macawresearch.com

PS: Grab the report info pack: http://www.macawresearch.com/Reports/NordicCardTrendsAndOpportunities20112012_infopack.pdf