Mobile Payments Moving Beyond Economic Problems

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PARIS — Economic fears that stalled investments in mobile payments technology are fading, but the potential for new entrants to disrupt the market still has some players on edge.

The recession slowed development over the past 18 months, but that trend is reversing, according to payments industry players. For example, manufacturers report that orders for contactless technology, including near-field communication-based cards and terminals, are on the rise.

New security concerns also have emerged, but these could create opportunities for payments industry players to battle the threats and increase consumer awareness of mobile payments for overall market growth, panelists said Dec. 7 at the Cartes & Identification conference.

"The economic crisis is mostly over," said Philippe Tartavull, the chief executive of the terminal maker Hypercom Corp. "We are now back to precrisis levels of 2008."

But manufacturers of smartphones and payment terminals should be on guard for major industry changes in the works.

"Google and Apple will change the game," Tartavull said, adding that innovations from other handset and smartphone manufacturers also likely will accelerate overall mobile payments growth and competition.

The recession's effect was not universal, and it "highlighted regional differences," said Edward McLaughlin, the chief emerging payment officer at MasterCard Inc. The downturn caused an overall slowdown in payments and a shift in the mix of payments from credit to debit, he said.

In certain emerging markets, such as India, payments growth continued unabated. E-commerce also continued to grow throughout the downturn, and while payments by affluent consumers tailed off, they are already rebounding, McLaughlin said.

As new payments technologies emerge, it is becoming clear that various regions and sectors are developing at different rates. The recession had little measurable effect in the developing world, where enormous growth opportunities lurk, said Olivier Piou, the CEO of Gemalto NV.

A "new class of people" in emerging economies suddenly have disposable incomes for the first time to spend, and in many cases the new channels for purchases are mobile, Piou said. "The good news for our industry is that this is really creating new activity and new momentum."

While economic concerns are abating, fears about security are on the rise.

The revelations in the worldwide press from WikiLeaks and other Internet-related security breaches have underscored the risks and value of data transmission, said Helmut Gassel, the president of chip card and security division at Infineon Technologies AG in Germany. "People are realizing that every electronic device needs to be secure," and "any device that can exchange data can potentially exchange harmful data," he said.

There are no simple solutions to enhancing security, and heightening government regulations and security standards sometimes creates additional problems, panelists said. "We have a landscape littered with attempts at security standards … and anything that protects could also work against the very principles of [consumer] convenience," McLaughlin said.

Although "it is not simple for industry players to join together," Gasson suggested that better cooperation among competing firms to determine security standards could help "create new markets" for mobile payments and encourage broader use of emerging payments technologies.

Security concerns aside, the acceleration of NFC trials and commercial deployments of mobile payments in certain markets is fueling optimism that 2012 will indeed be the year that two-way NFC mobile payments finally gain significant adoption in multiple global markets.

"This is really the last 'bridging' year before we see things taking off in real volumes in NFC in 2012," said Michael Kuemmerle, the head of the cards and services business unit at Giesecke & Devrient in Germany.

Kuemmerle said the pace of announcements about new NFC efforts in the past six months has increased significantly. "It is a huge opportunity for the whole industry [and] … a new playing ground."

Point of sale terminal manufacturers say they also expect to see significant growth next year, driven by widespread deployment of contactless- and NFC-enabled payment terminals around the world.

The year "2010 was a big year" in terms of sales, said Philippe Lazare, the CEO of the French terminal maker Ingenico SA. "There is no doubt [2011] is going to be big, too."

But major questions remain unanswered about the roles banks, handset manufacturers and telcos will play in connecting consumers to mobile payments.

"A key question for us is, who is controlling the identity [and access] to customers" in e-commerce and mobile payments markets, said Philippe D'Andrea, executive vice president at Safran AG's Morpho division. "It is the main challenge of NFC and the Internet in general," he said.

Besides creating mobile payments technologies, payments industry players must work to promote connections between emerging payment technologies and everyday activities, McLaughlin said.

T. Kim, a vice president at Samsung Electronics Ltd. of South Korea, said, "NFC is not fully mature yet." Many different hardware and software technologies are simultaneously in development, and it remains to be seen which ones will dominate, but "the customer's choice" will probably ultimately determine the winners, he said.

Samsung is the manufacturer of the Nexus S handset announced last week as the first NFC-equipped phone running Google Inc.'s Android platform. It is not clear that the Nexus S will be able to handle payments, however, as Google has said the phone's NFC chip is designed to only read data, not transmit it.

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