*This story was co-authored by Rita Chang.
While a lot of news came out of Mobile World Congress in Barcelona this week, the one item that caught our eye was the announced partnership between Visa and Samsung, a development that could give mobile payment a much needed shot in the arm. Under this agreement, Samsung would embed Visa’s payment capabilities into its devices that use the contactless Near Field Communication (NFC) technology, allowing consumers to make purchases by waving their devices nearby an NFC payment terminal.
This collaboration is needed if mobile payment is to gain any global traction. For the first time, we have a ubiquitous payment network allied with the largest smartphone maker in the world. So, what can go wrong?
NFC More Popular in Japan
Merchants won’t invest in NFC terminals unless there’s evidence consumers will embrace the technology, and consumers will ask why they should tap their phones at checkout instead of swiping their credit cards. Japan provides a good study in this case. NTT DoCoMo, the country’s dominant mobile operator, introduced a proprietary contactless technology known as FeliCa in 2004. Nearly 10 years on, only an estimated 10 to 20 percent of the country’s population is using tap-and-go payment even though most phones offered by DoCoMo come preloaded with the FeliCa chip.
On the other hand, mobile money has made significant inroads in developing economies because it has brought financial services to vast rural populations who previously had no access to banking services. As there was no replacement of existing payment mechanisms, the introduction of mobile money required no real behavioral change, making mass adoption much easier. Notably, NFC is not the enabler here; in most cases, the mobile operator uses standard messaging capabilities to enable users, through any mobile phone, to pay or get paid. The World Bank says there are more than 40 million mobile money users globally and almost half of them are in Kenya.
So, what does all this add up to? Mobile payment has a mixed record, and NFC is just one type of enabling technology. Indeed, mobile payment adoption should not be measured only by the yardstick of NFC adoption, even if ABI Research forecasts that nearly two billion NFC-enabled devices will ship in 2017.
Visa Might be the Tipping Point
The inflection point for mobile payment on a global scale could be near, and is likely within the next few years. The biggest players are swinging into action, even though many of them have been at this for years. Visa also announced at Mobile World Congress that it would team with ROAM Data to enable merchants to accept mobile payments. With this and the Samsung alliance, the world’s largest retail electronic payments network has taken positions on both the consumer side and merchant side. MasterCard is no slouch either, making a slew of announcements this week, including the release of the new MasterPass service that not only supports NFC but allows consumers to purchase merchandise by scanning a barcode and purchasing the item with one click using the MasterCard data stored in the MasterPass smartphone app.
All of these steps are a major boost for this space, since for NFC – and indeed for mobile payment in general– to become mainstream, influential players must lead the way. So, if anything can go wrong here, it would be the prospect of ineffective leadership by the key players. These companies must foster cooperation among the supporting cast in the mobile payment ecosystem. This includes getting merchants on board who have a lot to contribute when it comes to adding value to paying consumers.
Cooperation is Necessary
To engender cooperation, the leaders must be innovative and develop business models that benefit everyone in the value chain. So, perhaps more than anything else, the future of mobile payment hinges on the leadership of influential players like Visa and Mastercard, since it’s not for a lack of investments that mobile payment has yet to gain global momentum. After all, Google and PayPal are already jockeying for position, and we’ve even seen companies like Starbucks experiment with mobile payment in its various forms as a loyalty-building tactic.
If the key players in the mobile payment ecosystem can step up to the leadership plate in a sustained way and line up the supporting cast behind them, it should be a matter of time before reality trumps the hype in this space.