With the New Year nearly upon us, we're running daily pieces from industry experts on the trends they expect to see in the coming 12 months. Today Lawrence Wintermeyer, CEO of fintech industry body Innovate Finance, shares predictions on what 2015 holds for mobile payments, with contributions from across the industry.
Mobile payments made the headlines this year with the launch of Apple Pay and Android-based payment technologies. Paypal, Facebook and Square also introduced their own services to much fanfare in the media. Although take up for these innovations were slower than expected they did bring us closer to creating a cashless society. For the first time in history, card and online transactions became the preferred method of payment in the UK. More people also bought their Starbucks coffee using the iPhone app than any other form of payment, making the beverage chain one of the leading mobile payments providers in the world.
More shops enabled contactless payments than ever before in 2015, giving consumers the choice to tap phone on to an in-store device. The trend is expected to continue with shop purchases on mobile devices in the UK forecast to reach £54bn a year within the next decade according to research by Barclays bank.
Another coup for the mobile payments sector was Vocalink’s agreement with The Clearing House to undertake a major effort to build a real-time processing platform for the US market.
The contract is very significant for VocaLink, which already manages Britain’s Faster Payments Service on behalf of the Faster Payments Scheme. Over 4 billion payments have been securely processed since the service was launched in 2008 and the real-time infrastructure has created opportunities for further innovation in new services.
These aforementioned developments made it a productive year for mobile payments, but what can we expect in the year to come? As the most influential membership association for global fintech, Innovate Finance has access to the great leaders and visionaries shaping the future of finance. We asked a few of our members to give us their view on the mobile landscape in 2016 and how it will transform the way we shop, borrow and lend money.
According to Robert Atkin, CEO of innovations payments provider Xcrodis, the sector will continue to enjoy a steady uptake of new users for mobile payments: “Mobile is clearly set to become the platform of choice for an ever increasing part of our lives especially with the rapidly reducing cost of large screen smart phones. With the advent of mobile solutions we are reaching the point where interaction with our banks will be virtually eliminated save for the automated.”
Mobile phones will also present more opportunities for businesses and banks to reach the two billion people who are financially excluded. “2016 will be the year that the unbanked will finally have access to the same financial capabilities, globally, as everyone else at competitive rates and all through mobile,” said Atkins. “Automated solutions that leverage secure personal data will help make mobile tech ubiquitous everywhere in the world before we know it. The marriage of mobile with the net is here and is very powerful.”
Xcordis is planning the launch of a mobile, self-serve foreign exchange, wallet based solution in 2016. Holding multiple currencies, users will be able to instantly convert to any currency they setup, without making phone calls or sending emails and at competitive rates. The platform will also support digital currencies, offering instant conversion from digital to fiat and back.
Alain Falys, co-founder and CEO of Yoyo Wallet believes mobile payments will make the biggest inroads within the retail sector next year, as consumers become more accustomed to paying for services with their phones and expect more rewards with purchases: “As we saw with wearables, where Apple Watch won the column inches but brands like FitBit won the market, we expect ApplePay or SamsungPay to be surpassed in 2016 by mobile payment platforms that offer more than just payment.”
Yoyo Wallet is an innovation that makes payments simple and fast to use on a mobile phone, will also giving customers the chance to collect points and earn rewards in real time. The company raised $10m in Series A funding in 2015 and is currently planning an ambitious US expansion. “To date, we've seen a tentative toe in the water, but the true innovation in mobile payment will come in 2016,” said Falys. “This will be the year when retailers, following the steps of the food and beverage sector which is leading the way, will realise that the true value of a mobile transaction is about knowing your customer, having a personal engagement with your customer and increasing sales.”
Much of the payments uptake will occur in the UK. British consumers are the biggest online shoppers in Europe and the only European countries to adopt contactless. However, eCommerce purchases from a wireless device is surprisingly low.
"While 60 per cent of browsing happens on a mobile devices, only 15% of ecommerce sales happen there. The leap to mobile simply hasn't happened yet when it comes to purchases,” said James Allgrove, head of UK growth at Stripe. "This is largely because businesses have had to deal with dated payments infrastructure for years, meaning low mobile conversion rates have become the norm.
"But as tools and infrastructure evolve to shift commerce online, 2016 is shaping up to be a turning point for many businesses looking to compete on mobile. More widespread adoption of Apple Pay, which cuts out all the friction when buying on a mobile device, will enable mobile apps to achieve scale faster. Also, we can expect to see more businesses experiment with 'buy buttons' on Facebook, Twitter and Pinterest to bring the point of discovery closer to the point of purchase in a more native buying experience on mobile.
According to Stripe, everything will happen on mobile devices in the near future. But exactly how that plays out — and which apps prove capable of attracting people’s time, attention and cash — remains to be seen. “The companies that future-proof their business models in this fast-moving environment will be those that build on infrastructure that gives them automatic access to whatever new app or channel that becomes relevant," said Allgrove.
Mobile connectivity will also play a big role in how people send and receive money from loved ones in the New Year. According to leading digital remittance firm Azimo, more work needs to be done before the masses can use their phone to purchase goods or send money abroad.
“Today, people are more likely to carry a mobile phone than cash. So why are we still struggling to make purchases from our phones? It’s because as an industry we are missing the point,” said Marta Krupinska, co-founder of Azimo. “It’s not about how we're making payments or transactions easier, it’s about allowing consumers to do the things they want, when they want - whether that's paying for groceries if they've left their wallet at home, or sending money to loved ones overseas.”
Apple Pay and Zapp have started to help make that reality this year, but in 2016, the next phase of mobile payments – mobile 3.0 – will hopefully start to become the norm.
“We’ll see faster checkout lines, a reduction in transaction costs, and a renewed focus on customer service over handling cash,” said Krupinska. “Data is critical for retailers in understanding their customers, building loyalty programmes, and most importantly bridging the customer journey gap from offline to online. So unless something changes, I am hedging my bets that Apple Pay’s data restrictions will stifle its UK growth next year and Zapp will come out on top. “
Another big problem will be mobile security. HP recently conducted a survey that revealed that 90% of all IoT devices do not have encryption, and 70% have no security features at all. Given the lack of protection on wireless phones, can the wireless industry support millions of new payment users?
Joe Luong, CEO of mobile security specialist Crypta Labs believes that if we have a mobile payments revolution in 2016, we will also have major problems with hacking and data breaches if mobile devices aren’t protected: "Security should be a foundation stone when building mobile solutions, not merely an afterthought. Security begins and ends with better encryption. Making mobile devices more secure- be it it phones, tablets or watches - is the duty of each and every mobile payment operator. Unless the sector invests in security, there will be issues with any large-scale mainstream rollout of wireless payment services."
Without a doubt, the rise of mobile connectivity and the emergence of payment systems and platforms is unstoppable as more applications come to the market, and make it easier for customers to shop, bank, transfer and donate money. We look forward to supporting our fintech community in 2016 as it continues to shape a more secure and exciting user experience for mobile users over the next 12 months.
Although it’s too early to predict which innovations will take off, what is certain is that retailers, innovators and banks are working closer than ever to deliver better payment options and we believe that 2016 be an exciting time for the global sector.
Lawrence Wintermeyer is CEO of fintech industry body Innovate Finance.