Mobile payments may be the future of the payments industry, but so far it hasn’t hit the mainstream in the way some might like. The recently-established Mobile Payments Committee aims to change that, signing up the likes of Google, PayPal and American Express to educate the market on the benefits of switching from credit cards to mobile devices for purchases. Jason Oxman, head of the committee, told StrategyEye why no one payment method will win out.
¤ Why did you set up the Mobile Payments Committee?
Mobile payments is a very new development. In the US there are more than 1bn credit cards in service and our industry processed more than USD3.6 trillion in credit and debit card transactions in the past year. Of that figure less than USD100bn were mobile payments. However, we have seen in the US and globally a great deal of interest in the use of mobile payments.
What we have done is create a body designated as the industry’s hub of activity around mobile payments. Around the table are all of the traditional payments companies, but also all four of the largest mobile operators in the US, new payment platforms like Google, which has a digital wallet product, online payment apps like Groupon, other global technology companies like Ericsson, which does the infrastructure for mobile phone networks.
¤ Which mobile technology is most popular at the moment?
Mobile payments obviously take a variety of different forms globally. If you look at Kenya they have M-Pesa. It doesn't require a smartphone, it works via text message, and something like 70% of the exchange of currency in Kenya takes place using mobile phones.
Currently the most popular mobile payment platform in the US is a little coffee company called Starbucks. They use a 2D barcode, which you essentially display on your phone and it's scanned by the register - 55m transactions processed last year. There's also NFC, that uses your phone as essentially a contactless device; you just wave it in front of a terminal and you can initiate a credit card payment using that.
¤ Do you see any one standard winning?
No, that’s the great thing about it. Consumers will do it in different ways, using 2D barcodes, 3D barcodes, NFC, SMS, but the common theme of all of those models is they are all different means of initiating a credit-card transaction.
It’s a question of all of them rising together. Different merchants will make different decisions. Starbucks has scanners in all their coffee shops that you can use to scan the barcode. Android and Google have embraced NFC. Microsoft has announced that Windows Phone 8 will have NFC capability built in. That’s certainly a pathway that may be successful. I don’t think it will be the only pathway.
Unusually, the credit card industry has fully embraced mobile payments because it’s disruptive in a positive way to the credit card industry. The enemy is cash, we want consumers to use their credit and debit cards wherever they can and not use cash. The advent of mobile payments is just another means for consumers to do so.
¤ How big can mobile payments become?
Even the most optimistic projections I’ve seen for this year have mobile payments at a very small fraction of a percent. But given the popularity of smartphones around the world and the penetration of mobile phones I think it's well positioned. The technology is working. Most of the big mobile payment platforms will launch in 2012. We're years away from ubiquitous adoption, but this is the most significant technological development in the device used as a credit card, from the rectangle piece of plastic to the mobile phone. It's going to be not a question of if, but when, people use their phones as their means of payment.
¤ How big an issue is security?
So long as you're using your mobile phone as a payment device linked to your credit card you have zero liability. You will not pay a cent if anything goes wrong. For security reasons, consumers should protect their credit card information by, for example, using a pass code on their phone, the same way they should button the pocket that their wallet is in so they're not pick-pocketed.