The predictions made in the 1960’s, 1970’s and 1980’s haven’t always quite materialised. We’re certainly eating significantly more than ‘food pills’ and not yet travelling to work on ‘Hover Boards’. Some technological advances not even imagined 50 years ago, are beginning to become a reality, such as carrying just a small portable phone to securely pay for your purchases and replacing your keys, cards, vouchers and tickets!
Analysts predicted in 2002 that by 2006*, the mobile contactless payment market would rise to $55bn and many of us would be paying for everyday items using our mobile phones, but the banking and technology industries have had a number of challenges to overcome. Namely payment value limitations and security. Analysts are now indicating 2016 as the key start of the digital banking switchover**.
All of the UK’s widely accepted credit and debit cards are predominantly processed through MasterCard or VISA. These card schemes have security rules limiting the transaction value for contactless payments, currently £15. Widespread use of mobile contactless payments will be arguably constrained until this is increased. The card schemes are beginning to support an increase and are proposing a rise in the limit to £20 - £25 in early 2012. Clearly, this will stop most consumers using this payment method for their grocery shopping, but by keying in their PIN through the mobile phone handset, the mobile will be able to operate much like their credit/debit card, with larger payments and eventually a choice of cards.
Security has also been a key blocker to adoption. Look at any Mobile Payments web forum and you will see posts from consumers worried about security. The span of concerns range from conflicts with the phone’s signal to battery/tariff issues through to people buying ‘Readers’ and walking through crowded areas to steal money from handsets***. These concerns have been proven as unsubstantiated and it is likely that adoption will increase rapidly once consumers ‘try’ the mobile contactless payment method.
So where next. Mobile phones will eventually become more than a ‘mobile wallet’, and transition to a ‘mobile handbag’, enabling the replacement of house/car keys, credit/debit cards, loyalty schemes, vouchers, tickets and hotel room keys. The Industry has some way to go to allay consumers’ security fears and compatibility concerns, to increase adoption and usage of mobile phones as a secure payment method, but this could happen well before 2016.
Posted by Alexandra Doran on the Friday the 9th of December
* http://www.finextra.com/community/fullblog.aspx?blogid=4881
**http://www.finextra.com/news/fullstory.aspx?newsitemid=23199
*** http://www.guardian.co.uk/business/2011/may/20/contactless-pay-till-mobile-system
