Reality 3: Mobile payments will become commonplace - Video transcript

Martin King-Davies

In the mobile payment arena at the moment, there is an awful lot of hype, so there are lots of reports about rapid growth; forecasting rapid growth, there’s lots of firms making announcements. But in the overall scope of things, there isn’t that much happening. There isn’t large scale adoption at the moment, and we think there are three key reasons why that’s the case. Firstly, there isn’t a compelling customer proposition. There’s no reason for you or I to use a mobile to make payments when we can quite easily use cards or cash at the moment. Secondly, there isn’t really a business model that enables all the players who need to participate - so banks and telecom operators – to work together.  And thirdly, there isn’t really the technical inter-operability and technical standards needed to make this, you know, a complex system work together properly.

I think the future of mobile payments will change quite a lot over the next couple of years. I think there will be significant uptake. It won’t be tomorrow, but over the next couple of years. And I think that will happen as propositions which really excite and attract consumers develop. And particularly, those propositions won’t be about, you know, making the payment per se, but about improving the overall shopping experience, the shopping and purchasing experience for customers. So for example, we did some research which showed that customers would be really very interested – and actually willing to pay for – a service which provided electronic copies of receipts rather than having to jam lots of paper into your wallet, or however you cope with the receipts at the moment.

Banks and payments players should really be thinking carefully about the mobile payment arena. Our research indicates there are likely to be three types of possible scenarios for mobile payments.  One which is pretty much as it is at the moment, with banks, for example, taking a large share of the profitability, but two others, where there’s some erosion of their profitability, and a third where they are disintermediated, they are bypassed, let’s say, by new players, and the banks’ profitability would significantly erode. And I think to sort of address that issue, banks need to, (1) think very carefully about what’s happening; (2) they need to work together to address this – this is almost a bank versus telco. issue, in some ways. And thirdly, I think they need to really think about customer propositions and how they are going to put out products and propositions that are attractive to customers.