Mobile opportunities for banks
The emergence of alternative payments providers such as PayPal and the growth of mobile payments systems such as M-Pesa should be seen as a major opportunity for banks, not a threat, according to Ron van Wezel, global head of emerging payment streams at Deutsche Bank.
Mobile payments systems such as M-Pesa in Kenya, which was launched by Safaricom and currently has approximately 18 million users, have used retail outlets as the banking agents. The success of this system has previously prompted some observers to speak of a real danger of disintermediation for banks, in which alternative payments providers would simply bypass the bank completely. But van Wezel believes there will always be a role for the banks.
“Emerging payments providers need someone to clear and settle,” he said at the IPS conference in London on Wednesday. “They need someone to do the FX. Smart payment options require a banking provider that has global access to legacy payment channels for wallet funding, FX and funds transfer/cash out options. That’s where the banks will come in.”
Deutsche Bank introduced its own mobile banking tool in March 2009, allying itself with mobile payments provider Luup. The service allows customers to make payments and transfer funds using their phone. The bank currently offers a personal banking tool, My Bank, for iPhone and iPad. According to van Wezel, the concept of a mobile wallet, in which the customer replaces their physical cash and debit cards with their digital mobile phone, provides another enormous opportunity for the banks.
“If you look at smart payment options such as Google Wallet and many others, there is a fantastic chance to replace the physical wallet and enable payments in real time,” he said. “At the same time, no player can do it alone. You can’t just roll out wallets in all these markets overnight. So you have to partner with incumbents who have the retail relationships. We the transaction banks can enable these networks by powering these wallets at the back end.”
Van Wezel’s comments were echoed by Eimear O’Connor, head of mobile payments product management at Barclays, who argued that the mobile wallet offers huge potential to reach established networks of customers with a more efficient payment solution, but also expressed concerns about the effectiveness of a fragmented environment for the consumer in which multiple mobile wallets compete with each other.
“Am I going to download all these wallets from all the providers?” she said. “Am I going to have every one of these on my handset? I could end up with 20 different apps for the 20 different shops I use. Then to pay my friends, I’ll have to use one app to pay the half of my friends who use one wallet and another to pay those who use a different one. Is it viable?”
O’Connor observed that the creation of an interoperable global mobile payments solution would be the ideal solution, although that is currently some way away from becoming reality. At the same time, she acknowledged that merchants are starting to tackle some of the challenges of adapting to mobile payments, citing the creation of retailer consortium MCX in the US. MCX is a merchant-owned mobile application that aims to make mobile payments as simple as possible, while ensuring security.
Turning to developments in the corporate space, O’Connor added that corporate mobile payments tools can help firms to collect funds more easily than in the past.
“Barclays launched Pingit Corporate for clients in 2012, and it was adopted by the AA,” she said. “It uses QR codes, which are scanned by the customer mobile device to make the payment. The customer gets a receipt on their phone; the main benefit for AA is the ease of which it can process the payments from its customers, more quickly and efficiently than ever before.”
According to research from VocaLink published in February, the majority of people (81%) in the UK would be more likely to adopt mobile payment services if they are provided by a bank. The research also found that 33% of smartphone owners in the UK have used them to shop online, 42% of smartphone owners have used them for online banking, 43% of tablet owners in the UK have used them to shop online, and 33% of tablet owners have used them for online banking.