M-Payments’ Next Mission
The pressure to build scale rises with new competitors—Android Pay, Samsung Pay and CurrentC—joining Apple Pay in the emerging m-payments fray. Will consumers climb aboard? How they’re using m-payments so far, may tell the tale.
“Right now, Apple iOS and Android together account for more than 90 percent of smartphones in the U.S., so Android Pay’s introduction will basically double the potential user base for mobile wallets,” says Greg Burch, vice president of mobility, business development and independent software vendor relationships for Ingenico Group. One thing is sure: The next 12 months will bring more available m-payments options than consumers have ever seen, and it’s impossible to predict which will prevail.
Apple Pay caused a stir when it launched in October 2014, becoming the first mobile payments model to prove itself workable for a sturdy base of consumers, merchants and issuers. It’s earned kudos for its elegance and criticism for its limitations, as Apple Pay’s growth so far has been limited to usage only with the latest Apple iPhones (or the new Apple Watch), and at a relatively small slice of U.S. merchant locations supporting contactless payments via NFC.
And Apple Pay no longer is the only m-payments game in town. Rival m-payments services include Android Pay and Samsung Pay, with MCX’s CurrentC launching in beta this fall. (See sidebar.) Now all eyes are focused on which mobile wallet can gain scale fastest by maintaining merchant and issuer support, and earning repeat usage from consumers. For Apple Pay, the challenge will be how to build on its first-to-market advantage. Two months past the Oct. 1 EMV liability shift, many merchants still are upgrading payment terminals to NFC-capable hardware, opening the gates to all m-payments services. And with m-payments services for Android handsets becoming broadly available from all wireless carriers, consumer demand may spike, observers say.
- Android Pay Launches
- The Apple Pay Effect
- Samsung Pay’s Launch in Korea Drives Brisk Business
- Report: CurrentC Pilot to Expand Early Next Year
|Ready for Take-off
A glance at existing and new mobile payments services enabling a variety of smartphone payment options at the POS.
Samsung Pay: Comes preloaded on newer Samsung handsets, enabling SE-based contactless payments at any terminal, NFC-enabled or not. Launched in Korea in August 2015, in U.S. September 2015.
Android Pay: For NFC-enabled Android handsets; uses host card emulation (HCE) technology instead of secure element (SE) for third-party integration by banks and merchants. Live in U.S. September 2015.
MCX’s CurrentC: Merchant-owned consortium’s cloud-based app supporting QR code-based POS payments for iPhone and Android and Chase Pay, which incorporates 94 million credit, debit and prepaid cards in Chase’s total portfolio. Piloted in fall 2015 in Columbus, Ohio; expected to roll out in 2016.
Apple Pay: For NFC-enabled iPhone 6 models and newer iPads; includes SE built into handset; requires NFC enabled payment terminal at the POS. Launched in U.S. October 2014, U.K. July 2015, Canada and China November 2015.
How Consumers Use M-Payments
|Six M-Payments Predictions from Richard Crone
No single wallet will rule them all. Many providers and approaches will coexist, at least in the immediate future. Common themes within the m-payments user interface will begin to emerge across different devices and operating systems, simplifying the learning curve as consumers gradually adopt new payments habits.
Payment card networks will remain central with tokenization and other m-payment services. Visa, MasterCard, Discover and American Express all announced tokenization services within the last year or so, marking the first big across-the-board innovation for the card networks in 20 years. Based on EMVCo’s Payment Tokenization and Specification Technical Standard, tokenization replaces traditional card account numbers with unique “tokens” that are used as proxies to complete transactions online, in apps or at the POS, protecting sensitive data fromexposure. These services are becoming a vital approach to providing secure, streamlined m-payments for many providers.
PayPal has massive potential. With its huge user base of 169 million active accounts, its international reach, its open platform accessible via APIs and the technology coming from its Braintree and Paydiant units, PayPal arguably has the power to become the biggest mobile wallet of them all for both financial institutions and retailers.
Banks will fight to keep customers close. In an era of rising fraud risk and expanding options, study after study shows consumers still trust banks more than any other potential payments provider, though their edge could slowly erode. Banks stayed in the picture with Apple Pay by keeping their cards and brands intact within the app (by agreeing in the U.S. to pay a fee of 15 cents for every $100 spent). Millennials are banks’ biggest growth sector and banks that don’t offer them a good mobile wallet option will lose customers in droves. But banks still have plenty of opportunity to cement their roles with loyal consumers by developing their own bank-branded mobile wallets. This could be the killer play for banks.
Buy buttons will be big. Buy buttons to initiate payments within social media, texts, email and the Web will proliferate, causing the e-commerce and in-app purchase process to begin to blur with the POS experience, as consumers gradually shift to more of an omnichannel environment for purchases, as well as shopping.
MCX’s CurrentC could be the wild card that finds success in the end. It lost ground by not getting its wallet out faster, partly because it overreached with the original idea of getting around card networks and interchange by quickly inventing a new payments approach. But if CurrentC provides an API giving participating merchants an easy way to support in-app payments that consumers intuitively grasp, it could sail forward. CurrentC—or another startup—also could create breakthroughs by enabling bank-branded wallet acceptance within merchants’ apps.
Richard Crone is a principal with Crone Consulting LLC. He works with banks and merchants on mobile payments strategy.