Will Mobile World Congress 2016 usher in the era of mobile payments?

Using your smartphone as a bank card has been touted for years, but mobile payment is taking its time to enter the mainstream.

Apple Pay being used at a Pret A Manger store...how long until mobile payments are the mainstream?

Image: Pret a Manger

Mobile World Congress (MWC) is where consumers, businesses and the industry attempt to identify the technological development that will be the 'next big thing'.

A number of flashy products vying to be the latest trend will be on display, including the latest smartphones, virtual reality headsets and driverless cars. But away from the hype and the large booths there are more immediately practical technologies to peruse.

Some of these are already on the market, just waiting for the opportunity to boom. One is mobile payment and digital wallet technology, which despite the proliferation of smartphones across the globe, hasn't yet entered the mainstream. Think about it: how often do you see someone tap their mobile to use Apple Pay or Android Pay to buy products at a shop?

It's something of conundrum that the technology isn't more commonly used, since retailers, banks and mobile manufacturers are keen to push it as a quicker, simpler and more secure means of making payments.

For example, figures suggest that 68,000 retailers have deployed Barclays' Pingit mobile payment app -- which recently expanded to include the BlackBerry mobile operating system -- and the bank is keen to promote it as a fast, convenient payment system.

"Customers want to be able to make payments quickly, easily and safely, and by creating the option for funds to be transferred from within BBM conversations, we're allowing Pingit to make the payments process simpler for even more people," says Darren Foulds, Managing Director for Pingit at Barclays.

Sandra Alzetta, executive director of product enablement at Visa Europe, also shares the enthusiasm about mobile payments, claiming that the technology now has "genuine mass market reality".

"We feel now we're at a time where a few things have come together, and we know there's been a lot of consumer appetite for mobile payments," she adds.

However, the technology has hardly become mainstream -- so why is this the case?

"It takes time to change habits when it comes to payments, and someone really has to incentivise consumers or retailers to change the kind of payment methods that they use," says Thomas Husson, principal analyst at Forrester.

According to Husson, "mobile payments have definitely entered the disruptive era," with the game-changer being "the ability to add value before, during and after the transactions".

If mobile payment applications are to gain traction, he suggests, they need to give users a reason to pay with something like Apple or Google Pay instead of their bank card.

"It's not just about buying faster or more securely, it's about combining multiple technologies and tactics to facilitate the shopping experience. Nobody cares about payments -- what you care about is getting what you want. So to change habit, you can add value by adding rewards, coupons, product information, financial management tools on top of payments," says Husson.

Reluctant retailers

But it isn't just a lack of uptake by consumers that's holding back the widespread adoption of mobile payments technology: it's also the fact that retailers don't appear to be jumping on the bandwagon.

"Retailers are an interesting group, because usually they don't have the technology to achieve what they need to achieve and they're often the last to get technology," says Harper Reed, head of commerce at Braintree, a payments processing company and a division of PayPal.

Reed -- who served as CTO for Barack Obama's 2012 Presidential campaign -- believes that PayPal Commerce, new set of tools for retailers by PayPal and Braintree, can help retailers to unlock the potential of all forms of e-commerce, including mobile payments.

"PayPal Commerce is an amalgamation of a bunch of different technologies into what amounts to building blocks for retailers to get the innovation they need to be successful," he explains.

However, for Reed, one of the main barriers to the adoption of mobile payment technology and digital wallets is the fact that it's expensive to deploy -- particularly if you're a small or boutique retailer.

"One of the problems with retail technology -- and contactless payments is a great example -- is that, if you're a small shoe store, this is a hard business. You have to invest a lot of money in technology to support that, whether you want to or not isn't necessarily the question," he says.

"Those retailers don't have these opportunities -- they're small businesses, they don't have a lot of money to throw around to try the newest thing," Reed adds.

Nonetheless, he remains confident that mobile payment technology will eventually take off -- and naturally he believes PayPal Commerce will be there in order to meet those demands.

"We've been very bullish on mobile for years -- not just mobile payments, but mobile transactions are the most important thing. I'm really excited about it," he says, adding that for him and Braintree, the main question is now "how do you build retailers something they need and want without spending a lot of money when something comes out"?

Open ecosystem

For Forrester's Husson, the key to mobile payment technology actually taking off is for the various factions competing to bring it to market to work together for the greater good.

"Overall it's going to be very challenging for one category of player to win that game; it's going to be about partnerships, collaboration and the need to provide some sort of open ecosystem where the main players can combine offerings," he explains.

Visa Europe's Alzetta also emphasises the importance of across-industry collaboration when it comes to bringing mobile payments to the mainstream.

"It's absolutely vital working with the banks -- in effect, it's the bank putting their card safely onto a mobile phone. So everything that happens, happens because the banks are working with us to enable that, so it's really fundamental," she says. Alzetta also describes retailers as a "fundamental pillar" in the drive towards mobile payments becoming widespread.

"We want retailers to accept contactless payments, be it via card, mobile or on wearables. There are still a few retailers that still haven't put contactless out, but momentum in the UK is significant and moving forward we will require terminals to accept mobile as well as contactless. By 2019, they'll need to have been upgraded to accept that," she says.

Is 2016 a watershed year?

But according to Husson, mobile payments and digital wallets will only get to the point where they're mainstream when consumers and businesses stop talking about them, because then they won't be exciting and new -- they'll be useful, everyday commodities.

"Any of the solutions or announcements made at Mobile World Congress should be looked at from the perspective of how do payments, at the end of the day, disappear into the background and provide some sort of combined checkout experience including loyalty and other services," he says.

That day is some way off, however: according to Forrester's predictions, while mobile payments will account for $142 billion of US transactions by 2019, that amounts to just one per cent of all payment transactions.

Braintree's Reed also shares the view that, despite improvements in deployments and an increasing awareness of the technology, 2016 won't be the year that mobile payments enter the mainstream.

"One of the funny things about mobile is that every single year is supposed to be the year that mobile works. The thing to remember about mobile is that mobile is huge and in every one of our pockets," he says.

"So is this the year we're going to see more? Yes, but there's always more work to do. We're not in a good spot where mobile can work easily -- we're not quite there yet," Reed concludes.

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