Mobile payments are fun again. Now that Apple have said that they paying with your phone is OK, all the cool kids want to do it. But how exactly are mobile payments going to work in the mass market?
We’ve all been to countless mobile payments conferences over the last few years and we’ve all been involved in countless discussions about who would use mobile payments and why. Why, in particular, would anyone bother messing around setting up stuff on their phone when a €1 plastic card works perfectly well? Apple Pay has legitimised the space and there is now a new push to deliver mobile payments into the mass market. It was very interesting to me to note that the mere announcement of Apple Pay was sufficient to drive up the Google Pay volumes, for example. But for me, the aspect of the industry that has changed most over the past couple of years is the recognition that in-app payments deliver the overall best experience for retailers and consumers.
But a recent trip to a franchise of Chipotle Mexican Grill in Manhattan was a rare and shining moment where paying with a phone was frictionless and actually sped things up.
Since I love a) Manhattan, b) Chipotle and c) mobile payments, I thought I would try this out for myself. Next time I was at our New York office I downloaded the Chipotle app, powered it with my Simple account and ordered. Woo hoo! I remember thinking at the time (and possibly tweeting too) that I failed to see how a bank wallet or a telco wallet or a scheme wallet could have made this a better experience.
I was reminded of this at the Payments International pre-conference day on Mobile Payments, where I had the good fortune to chair a discussion between Ian Sayers (the CTO at Zapp), my good friend (and Consult Hyperion Associate) Masha Cilliers and John van der Heyden (Payments Development at BNP Paribas Fortis) on the new business models around mobile payments and the potential role(s) for banks in the mobile payments space. It was an interesting discussion and I really enjoyed the variety of questions from the audience that made us think throughout. My own opinion, well-known to blog readers, is that the new mobile payments space is all about apps not wallets and that the bank wallet strategy should be to create infrastructure and APIs for retailer and service providers to use.
It will work through either the Shell Motorist app or the PayPal app itself. When drivers pull up to the pump, they will be able to select the corresponding pump on either app – which are available for Android and iOS. They can then just fill up their vehicle safe in the knowledge that they will be automatically charged through PayPal.
I picked on this example because I remember that Consult Hyperion did a study on the forecourt use of a mobile app for one of the big petrol companies a few years ago. I think the outcome was quite positive (it centred on building a relationship with the customer “through” the franchised forecourt operators, which I guess the idea of the Shell Motorist app here) but I also remember that at the time there was a question about whether mobile phones could be used on the forecourt at all! It all seems so last decade now!
My point is that the retailers’ own apps are always going to deliver the best experience, so it is incumbent on the mobile payment industry to deliver a better solution into this app world. Card-on-file isn’t good enough, for a whole raft of reasons. Much better to give the retailers direct access to payments through an API as Shell have done with PayPal (who were, remember, one of the first players in the payments API game). This works rather well in the Apple Pay world, where the retailers can integrate Apple Pay into their own app and use it to get secure, tokenised card payments up and running, immediately bringing chip and PIN levels of security into a hitherto card-not-present space. I wonder if this might be a more important part of the Apple Pay story than the stuff about tapping and paying in store? Dunkin’ Donuts don’t have NFC, but they do have Google Wallet integrated into their app and that, in the great sweep of things, might be far more important.
As well as Apple and Google and Samsung, Visa and MasterCard are have been developing “wallets” that will deliver more functionality to the retailer than simply executing payment transactions.
For now, the main focus is online, but you can see how this will also eventually link up with Visa’s ambitions in mobile payments — which include a strong emphasis on NFC embedded in mobile devices and a set of APIs to take its solutions anywhere that commerce happens — as well.
Masterpass and V.Me are both great, but will they have enough leverage? Who ends up shaping this market? Can the schemes generate enough value-added to be the natural choice? Will the wallet turn into a set of APIs and vanish from customer view into in-app solutions? Will the retailers be able to get traction for a solution of their own (like MCX in the US)? Will direct-to-account solutions like Zapp chip away at scheme market share? And what about the MNOs? In her review of Q1, Sirpa Nordlund of Mobey Forum was blunt:
With Apple controlling its own ecosystem and HCE putting power in the hands of service providers, MNOs have been unceremoniously ousted from the top table.
Vodafone will want to quibble, having just launched their mobile wallet with Visa Europe. Look, I have no more idea where this all going than than anyone else, but I’m looking forward to discussing these and similar issues at Mobile Commerce and Banking 2015 on Monday, where I’ll be giving a kick-off talk on “app and pay” and will also be chairing a discussion panel looking at investment in the field. See you all there.