PARIS–Mobile payments are set to expand dramatically within the next two years, payments industry executives concurred during a roundtable discussion here Dec. 7 at the Cartes & IDentification conference. Although various obstacles to widespread deployment remain, the panelists agreed the industry has achieved significant progress within the past 12 months.
The recession put a damper on development during the previous 18 months, but it has mostly loosened its grip on the payments industry. Orders for contactless technology, including Near Field Communication-based cards and terminals, are on the rise, manufacturers said. New security concerns also have emerged, but these possibly could create opportunities for payments-industry players to join forces to battle the threats and increase consumer awareness of mobile payments for overall market growth, panelists at the World Card Summit suggested.
“The economic crisis is mostly over,” said Philippe Tartavull, chief executive officer of U.S.-based terminal maker Hypercom Corp. “We are now back to precrisis levels of 2008.”
But manufacturers of smart phones and payment terminals should be on guard for major industry changes in the works. “Google and Apple will change the game,” Tartavull warned, adding innovations from other handset and smart phone manufacturers also likely will accelerate overall mobile-payment growth and competition.
The recession’s effect was not universal, and it “highlighted regional differences,” said Edward McLaughlin, chief emerging payment officer at MasterCard Worldwide. 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 countries, 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 added.
As new payments technologies emerge, it is becoming clear that various regions and sectors are developing at different rates, said Mariano Dima, executive vice president, marketing and payment solution at United Kingdom-based Visa Europe.
Emerging markets such as India and China are seeing broad growth across all channels, while in Europe growth primarily is occurring in government payments and low-value contactless transactions. “We are looking to improve the value chain ... and to make sure (payment service) are easy to implement,” regardless of their region or channel, Dima said.
Another significant effect of the slowdown was “a shift from credit to debit, and debit to gift cards,” said Xavier Drilhon, managing director, card systems division, at France-based Oberthur Technologies.
The recession had little measurable effect in the developing world, where enormous growth opportunities lurk, said Olivier Piou, CEO of Netherlands-based 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, division president of chip card and security at Germany-based Infineon Technologies AG. “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” the industry is trying to promote,” MasterCard’s McLaughlin said. “While enforcing rigor (in Internet security), we must make sure we’re not over correcting” and limiting consumer accessibility to Internet and mobile payments.”
Noting “it is not simple for industry players to join together,” Gasson suggested 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, head of the cards and services business unit at Germany-based Giesecke & Devrient, noting 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 also expect to see significant growth next year, driven by widespread deployment of contactless- and NFC-enabled payment terminals around the world. “2010 was a big year” in terms of sales, said Philippe Lazare, CEO of France-based Ingenico. “There is no doubt (2011) is going to be big, too.”
But the payments industry must face other obstacles before consumers widely adopt mobile payments. And 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-payment 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-payment technologies, payments-industry players must work to promote connections between emerging payment technologies and everyday activities, MasterCard’s McLaughlin said.
After emerging from the recession, the payments industry is positioned for a new chapter whose success may hinge on greater cooperation among players to create interoperability, consumer trust and broad accessibility, the panelists agreed.
“NFC is not fully mature yet,” said T. Kim, vice president of South Korea-based Samsung. 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.
“What we have done in 2010 was to put together building blocks of NFC to prepare to go to market,” said Oberthur’s Drilhon. “If we want NFC to really grow, we must provide interoperability in a balanced ecosystem.”
