Mobile payments poised to reach critical mass

Despite security worries, industry players agree more people are expected to pay for a can of soda with their cellphones.

SINGAPORE--While security concerns may encumber the adoption of mobile financial services, industry players agree they have to prep themselves for greater demand for such services in future.

Speaking during a panel discussion at a mobile financial services conference Monday, Ericson Chan, group head of systems development for consumer banking at Standard Chartered Bank, noted that although many of the bank's customers may not be comfortable with using smartphones to make payments, the next generation of consumers are apt at doing so.

According to a December 2006 study conducted by management consultancy Edgar, Dunn and Company, 80 percent of global respondents believe that use of mobile payment services will be banal in the next five to 10 years. Asian respondents comprise 19 percent of the 489 people polled for the study.

Chan said: "If we want to have a sustainable business model, we need to continue to test mobile financial solutions until the masses are ready."

Standard Chartered has rolled out mobile financial services in several Asian markets with varying success, he said. Not surprisingly, tech-savvy Korean customers were most receptive to the bank's mobile financial services, even compared to those in Singapore where the island-state's mobile penetration rate stood at more than 100 percent, he added.

With India's mobile phone subscriber base growing at 6 million per month, Mumbai-based Yes Bank has been using mobile financial services to reach out to Indians who do not have bank accounts, said Chandrashekhar Bhide, the bank's product head for mobile and Internet services.

While some of the bank's mobile services such as interest rate alerts, are popular, Bhide said that transaction volumes do not commensurate accordingly. "It will probably take a couple of quarters before mobile banking takes off in India," he said.

Getting past security barrier
Meanwhile, security could be a bugbear in achieving a critical mass of people using mobile financial services. According to delegates at the conference, with the introduction any new technology-driven banking service, the onus is on financial institutions to educate customers on security.

Paolo Baltao, head of financial and government services at G-Xchange, a wholly-owned subsidiary of Philippine telco Globe Telecom, said users of its G-cash electronic wallet were initially under the misconception that if they lost their cellphones, they would lose their money.

G-cash allows any Globe Telecom mobile subscriber to send and receive money, and make payments through text messages. Users can top up their G-cash wallets at ATMs and retail outlets throughout the Philippines. Since its inception in October 2004, G-cash has amassed 1.2 million users.

Baltao said: "We had to educate our subscribers [and explain] that the wallet is not really on their phones [and that] it's in our servers, accessible only with a PIN (personal identification number).

"Our system is fully traceable, such that if you lose your phone, I'm sure you'll report the loss to our customer service center [and this] will block the use of your wallet," he said.

"Even if the person who stole a phone somehow knows the PIN to access a G-cash wallet, all transactions are fully traceable and we'll know to whom the money was transferred," he added.

More importantly, Baltao said, the fact that successful mobile financial services mostly involve micro-payments is hardly a coincidence. He explained that the propensity for fraud is significantly reduced when the amount of money involved is smaller, he explained.

Lance Blockley, director of Edgar, Dunn and Company in Australia, added: "Who's going to defraud me of a two-dollar parking ticket? If someone is going to defraud a payment system, he's going to defraud it for a significant amount of money."

For mobile payments to gain widespread use like hard cash, Blockley said, one critical factor is for usage to be fostered by merchants and consumers alike.

"The thing about cash is that everybody handles it and everybody will [accept] it, that's why it's such a good payment device," he said. "If consumers see that they can use mobile devices at all the merchants they go to, then they will be encouraged to adopt mobile payment services.

"Although it's a chicken-and-egg problem, [that] exists in any new payment system," he added.