Recent advances in mobile technology may be exciting, but the real focus for the future of mobile payments is the chip.
There was recently a great gathering of the good and distinguished in all things mobile at the Mobile World Congress.
This event is a big deal, as all the mobile operators and manufacturers announce their major news items for the year – such as Microsoft’s partnership with Nokia. This is why Steve Ballmer, CEO of Microsoft, was present, along with Dick Costolo, CEO of Twitter, Eric Schmidt, executive chairman of Google, and more than 100 other speakers.
In fact, to show what a big deal it is, you only need to consider that there are 50,000 attendees from more than 200 countries with 1300 exhibitors. That’s big. So what was hot?
The fact that mobile networks cover approximately 90% of the world's population, and that soon we will have HD and 3D phones, ones you can dictate to, and they translate calls, texts, mobile sites and emails in real-time.
Objects of desire
There will also be motion phones that recognise where your eyes or head move, and track your environment as required, and perceptive phones that recognise what you’re doing and use push-and-pull technologies to fit with your needs and desires.
In addition to these, you will be able to buy analysis phones that monitor your heart rate, blood flow, blood sugar levels and more – and alert as necessary – and ‘haptic’ phones that use touch technologies. With one of these, a kiss from your partner on their phone screen could be relayed as data to your phone – so you would actually feel a kiss if you put your lips on to your phone screen.
Mobile is taking over everything, and that is why it is so important. In fact, it is now more important for banks than the internet, which, according to some banks, is more important than call centres, branches and ATMs.
Some might say that mobile is just the internet, but it isn’t, as what sets it apart is its apps – low-cost programmes that are easily downloaded to a phone, and perform a wide range of functions.
Potential billions
Apps typically start at a price of just $0.90 to download, and that is their relevance to banking. Money. Little bits of money that, combined, make millions and billions of dollars.
For example, one app – the game Angry Birds – has taken more than $70m in revenues, most of which is for sales at less than $1 per sale.
There are now millions of sub-$1 downloads taking place worldwide every second. So that old idea of paying $0.50 to read a page of a newspaper was the fallacy of a decade ago, when we talked about micropayments.
That's Rupert Murdoch's dream, but it's a lame one if you ask me. Paying $0.50 for a game that entertains for weeks… that's real value. So mobile is different from the internet and is all embracing, ubiquitous, 24/7/365. It covers mobile payments, contactless payments, mobile banking, mobile financial planning and more.
Although often spoken of in the same breath, these are different areas, which are converging as we speak, and the borderline between contactless and mobile is now very grey.
Instant connection
Near-field communication (NFC) is short-range wireless technology, which enables two devices to connect instantly. Orange has just committed to rolling out contactless payments and NFC capabilities across its entire European network next year, whilst Google and Apple are committed to incorporating NFC into Android and iPhones.
When both companies announced this, everyone got excited by the fact that next-generation Androids and iPhones are designed as payment systems. This is incorrect.
They do have built-in functionality for NFC contactless payments, but it is not the main reason that Google and Apple have incorporated the technology. It’s understood that they did it mainly to leverage simple communications between devices wirelessly without the need to use complex Bluetooth pairing.
In other words, touch your phone to the car, TV, computer or payments terminal, and forget having to go through a set-up process, as you do with Bluetooth. But, by incorporating an NFC contactless capability into every Android and iPhone, the smartphone suddenly becomes a powerful payments platform, as it can now be used for contactless payments.
Simple payments
More importantly, the phone can not only make contactless payments but has the potential to take them too. In other words, every Android and iPhone can become a point-of-sale terminal – and this definitely brings us into the era of simple mobile payments.
And that is a revolution. It’s a slow revolution, however, as the fundamental issue is still not addressed: where can you use an NFC chip? Barclaycard has been pushing Visa Paywave for a couple of years now, and yet I hardly ever get a chance to use it.
Sure, we may now have a few London taxis wirelessly enabled, but it’s hardly dense terminal acceptance or usability. And there’s the rub: we need more terminals. Maybe they could learn something from Zapa in Ireland, where AIB Merchant Services have worked closely with the company to roll out terminals that can use the tags.
Half of all AIB’s merchant terminals are now Zapa ready: that is 40,000 of its 90,000 terminals, with more than 1.5 million contactless transactions in the year to September 2010.
Beyond mobile
Compare that with Barclaycard, which has rolled out just 42,500 merchant terminals to date and is processing just over 1 million transactions by November 2010, and you can see the challenging dimensions that is faced.
Hmmm… but there’s no doubt that this will grow… except that by the time it does, technology will have moved on and direct mobile-to-mobile, or M2M payments will be the order of the day.
Ah well, we always roll out three-year-old technologies to meet three-year-ahead needs. Even when we think about this, it is also a transient revolution, as mobile is not the future. The future goes beyond mobile, as the focus of all of this is actually the chip.
The chip technology will converge over time so that EMV, RFID and SIM chips all become one. This means that consumers and banks no longer need to think about separating mobiles from cards from payments – all of them become one and the same.
The chip is loaded with functionality, including banking and payments. When you can take a chip and stick it anywhere to wirelessly communicate anything, including a payment, then the real next generation of payments will have really arrived. And maybe, just maybe, by then it will mean just paying with a wave of the hand.
