Mobile Digital Payments Reach a Tipping Point

Despite the Challenges Facing This Market, Digital Payments Have an Assured Future

Last week I attended a mobile payments conference at Canaccord Genuity, an investment bank. Other attendees included telecom and technology companies such as O2, Bango and Monitise, as well as other investment banks.

Most of the issues discussed at the event were long-standing topics. What is the business model for mobile payments? Where do traditional financial companies such as credit cards stand? How committed are payment terminal manufacturers to physical in-store mobile payments?

It’s difficult to generalise about mobile payments because there are so many different forms of transactions. Digital payments, for example, have different characteristics to physical payments.

When it came to digital payments, presenters agreed that growth was reaching a tipping point. This has partly been brought about by improved conditions in the mobile and telecom markets, which have facilitated such transactions. Smartphones are offering increasingly advanced applications and these smartphones are now reaching a mass scale. In addition, they’re being supported by growing data connections, and the situation can only be helped by the advent of LTE.

Cynics argue we’ve heard all this before. In fact, we’ve been proclaiming this for the past three or four years. However, this time I really feel that times are changing. You only have to look at the growing number of mobile payment applications launched in the last 12 months.

Many UK retailers have been promoting online catalogues through mobile apps with in-app purchase options. Examples include Debenhams, Tesco and Marks & Spencer. eBay and PayPal continues to gather strength. PayPal Mobile, in particular, is seeing big uptake on tablets. Indeed, PayPal reported that the application had exceeded expectations, handling almost $14 billion in 2012. I’ve also seen banks such as NatWest and Barclays release some great peer-to-peer payment applications using phone numbers.

I expect these numerous forms of digital payments to continue driving much of the short-term growth in mobile payments. The area is likely to receive a boost from mobile commerce such as online search and shopping, and advertisements.

Mass-market adoption of physical payments using a mobile phone in a store is perhaps still a way off. Companies are still assessing different technologies such as QR codes or NFC. At the event, the latter was regularly mentioned as a long-term goal for many companies.

Attendees couldn’t identify a clear winner in the overall mobile payments market. But I don’t think there’ll be just one. I believe that the mobile payments market is probably going to end up with a range of providers in different areas, much like what we already see with the financial services market. I certainly wouldn’t bet on just one runner.