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A week is a long time in mobile payments

Alex Kwiatkowski

A week is a long time in mobile payments

And they say a week is a long time in politics. On current evidence, the same is true where mobile payments are concerned. The last seven days have seen a raft of announcements regarding new products, technology trials, strategic investments in start-ups, and hopelessly optimistic market-growth forecasts. Oh, and a sneak-peek on a casing that can turn Apple's iPhone into a contactless-payment device. But amid all this noise, is there anything actually worth listening to? And more importantly, how can banks attune themselves to picking out the right notes rather than being overwhelmed by a deafening wall of sound?

The trials and tribulations of mobile payments

Outside of the legal and pharmaceutical arenas, Ovum is hard-pressed to think of another industry where the word “trial” crops up as frequently as when it is used in conjunction with the evolution to mobile payments. Exercises to investigate the technical and commercial feasibility of such services have long been a feature of the retail-banking sector so it is difficult to get excited about another experiment involving multiple parties hoping to learn the secrets of mobile-payments alchemy. Frankly, it has reached the point where a trial is just another notch on the proverbial post.

The latest in a long line of experiments will see MasterCard use a miniature SD card from Gemalto that can be attached to a SIM to convert handsets into contactless-payment devices using single-wire protocol (SWP). Singapore is the country chosen for the pilot project, which will also involve DBS Bank, Ez-Link (a prepaid card specialist), and StarHub (a telco). If history is anything to go by, this trial will produce some interesting and possibly even valuable results for the organizations involved. MasterCard is already talking about “providing a path for ubiquity” for contactless mobile payments. In our view such grand proclamations are a little premature, not least because of the paucity of NFC-enabled handsets using SWP. While there's no harm in future-gazing, banks should pay attention to what's actually going to affect or benefit them in the near term. Trials do not fall into this category, but this will not prevent a steady flow of further experiments.

Filtering out noise to find the interesting developments

Trials aside, there have been some noteworthy developments in mobile payments in the last seven days. In the US, Obopay revealed a white-label proposition that will allow institutions to launch branded mobile-payments services. Having learned several valuable lessons from its commercial relationship with Citibank that ended in December 2009 after a three-year test, Obopay has reinvigorated its portfolio with four new products under the Mobile Money for Banks umbrella.

There are a couple of points that merit further mention. First, Ovum believes retail banks must have a mobile offering. Institutions that are behind in the deployment of mobile services must act now or risk placing themselves at a competitive disadvantage. Second, Get Paid by Obopay allows anyone (businesses or individuals) to receive debit-card or ACH payments into their bank account via a mobile device, as well as via a website or email. This is attractive to small enterprises and sole traders, and in particular mobile trades people such as plumbing or electrical contractors who often rely on settlement via cash or check.

Has Obopay revolutionized mobile payments overnight? No. Obopay CEO Carol Realini has previously spoken of the complexity of the mobile-payments industry and the need for patience. This pragmatism, which Ovum agrees with, will serve Obopay well in the next phase of development.

One other announcement that caught our attention was Google Ventures' investment in Texan start-up Corduro. With the number of devices running Google's Android mobile operating system on the rise, the decision to take a stake in a mobile-payments platform provider signals that Google wants to leverage its assets. Echoing the sentiments of Obopay's Realini, Google CEO Eric Schmidt said venture investing is a long-term game measured in years rather than quarters.

In the meantime let's see what the next seven days bring.

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