8 Problems with Mobile Payments

World Wide Woes

There is no global standard for mobile payments, particularly in countries with mature economies that are building mobile on top of their existing systems. This is creating compatibility problems. "If I can send you a text message knowing your phone number no matter where you are in the world, then I should be able to send you money" in a similar manner, said Ather Williams, head of global transaction services at Bank of America Merrill Lynch.

Failure Fatigue

Anyone who tried one of the earliest mobile wallets may have been frustrated by the system's failure, and thus reluctant to try anything new. And it's especially hard for consumers to forget when they can't uninstall the defunct wallet apps from their phones, as was the case for some Softcard users.

EMV and Magstripe

Mobile point of sale devices may not transition smoothly to EMV-chip card acceptance, in part because EMV transactions typically require a bulkier device to "dip" the card into. Square is taking a particularly aggressive stance by offering an NFC/EMV reader that doesn't do magstripe payments at all. Though merchants can still use its separate magstripe reader, Square's setup makes EMV the easier choice.

Slippery Security

Mobile wallets can improve security through a number of technologies, including GPS and fingerprint-scanning. But any system is only as secure as its weakest link, and in the case of the iPhone, the fingerprint scanner for the lock screen can be bypassed by typing the user's four-digit PIN instead. Apple recognizes this issue, and plans to require a minimum of six digits when it updates the iOS mobile operating system.

Not-So-Mobile

Mobile point of sale devices are supposed to free up merchants to sell items anywhere in their stores or on the road, but too many just keep these devices at the counter. They view them as cheaper versions of traditional point of sale terminals, thus limiting the potential inherent in using a mobile device.

Too Many Stakeholders

To succeed in mobile payments, a product needs a lot of support. Even Canada's suretap, which has the participation of all of the country's major carriers, still has some glaring omissions in its coverage map. It doesn't yet work on Apple devices, and so far it has only one of the country's major banks on board.

Travel Troubles

Many mobile wallets operate in more than one country, but they can only spread so far. The M-Pesa system is extremely successful in Africa, but it has less potential in Europe. "M-Pesa is ideally suited to countries which are not already served nationwide by traditional banking infrastructure," said Vodafone senior media relations manager Simon Gordon when the product launched in 2014 in Romania, where most residents carry cash.

Repeating Past Mistakes

Linda Mantia, RBC's EVP of cards and payment solutions, has a warning for banks developing mobile wallets: Learn from the lackluster adoption of contactless cards. "It became a competitive environment" in Canada, she said, with Visa, MasterCard and Interac promoting separate products. Mobile wallets similarly will not work without collaboration.