It’s been a long and winding road for mobile payments, with banks, network operators, device makers, OTTs and payment providers all trying to lead the mobile payment ecosystem. And this is before anyone has won over the public with a secure, convenient and compelling use case.
With the launch of the Apple Watch and Samsung Galaxy S6, do we finally have two flagship devices that will convince consumers, and the industry, that mobile payments have come of age?
Technology is rapidly changing the way we pay for things, and the pace is surprising. In the UK, cashless payments are now more popular than cash, with contactless payments growing a remarkable 255% in 2014. Could this adoption rate be emulated by the EMV mobile payment ecosystem?
Here the conversion is a little trickier, as it’s not only a matter of addressing POS fragmentation but also user convenience. You only need to look at how easy it is to buy from Amazon or tap to pay with contactless, to see that getting this right is essential.
Deloitte predicts that by end-2015, five percent of the world’s 600-650 million NFC equipped phones will be used at least once a month to make contactless in-store payments at retail outlets. This is ten times more than the 0.5 percent of the 450-500 million smartphones in mid-2014. Clearly, things are headed in the right direction.
Mobile EMV payment is quickly being addressed by tokenization technology as well. We’re seeing the emergence of two models for EMV mobile payments; HCE and SE tokenization. The main difference is that HCE tokens are likely to be limited in their scope, for instance used for one-off purchases, and have restricted time frames. SE tokens, on the other hand, can be permanent, since they are stored in tamper-proof devices. But as customers paying for goods will never know the difference, the decision of which option to choose should be based on an analysis of the local market, its available devices and payment infrastructure.
We believe that both approaches have merit (and therefore our Tokenization Service supports them both). Tokenization helps speed up mobile payment deployment as it integrates easily into existing EMV payment network infrastructure, and does not require new cards to be issued.
Since Apple Pay launched, CEO Tim Cook stated that the new service now accounts for $2 out of every $3 spent using contactless payments from Visa, MasterCard and American Express in the US. Though seemingly incredible, it does shine a light on something particular to America – the US has very few EMV solutions and even fewer contactless ones. In October of this year, the liability for card fraud will fall on the merchant if EMV isn’t available at POS, and the bank if an EMV card hasn’t been issued to the customer. This will drive massive opportunities for EMV contactless payments, and opens up further opportunities for tokens as a secure and trusted payment option.
Still, the POS issue could remain a problem. During the launch of Samsung Pay, Samsung noted you could make an NFC payment at only 10% of US stores. Its payment platform incorporates the ability to interact with the magnetic stripe readers built into traditional POS terminals. This means US Samsung customers will now be able to use the service to pay for goods in upwards of 90% of stores. Interestingly, loyalty cards could also use sit on Samsung’s magnetic secure transmission technology, which could also add customer value.
In Europe, I’m sure we’ll see both Apple Pay and Samsung Pay gain some good traction quite quickly. And with other players like Microsoft deploying HCE for Windows 10, and Google continuing to build its Google Wallet platform, mobile payments look well placed to succeed.
Now that the most popular devices are able to process mobile payments, we need to work to build trust in the ecosystem. At every step of the way, tokenization ensures that 100 percent of consumers are served quickly and securely.