There’s plenty of criticism pointed at banks for being slow to move in the mobile payment space (estimated to grow from $18 billion in 2012, to $117 billion in 2017). Investment in mobile payment is climbing yet banks remain largely on the sidelines. There are plenty of reasons why banks are not among the crowd – costly integration with legacy systems, investment constraints, and regulatory concerns – just to name a few. As we’ve previously noted, those who are investing in payments include a healthy mix of major players (with the likes of Apple and PayPal) as well as startups and smaller firms.
What, ultimately, is the consequence of banks not moving into mobile payment now?
In answering this question, we need to be mindful of adoption trends. Almost three years on since the launch of Google Wallet, a first mover in mobile money, trust remains a central theme in mobile payments. Consumers continue to be hesitant to adopt citing security fears. Security and privacy are themes that will not wane and, in fact, will continue to grow in importance. This is due in large part to increased regulation as well as heightened awareness given recent breaches, fraud losses, and other turmoil that consistently peppers the news. Security and consumer trust are key considerations in gauging how mobile payment will take shape in the coming years.
Payment providers should be conscious of consumer behavior given these concerns. The fact remains, whether you love banks or hate them, consumers most trust banks in protecting and safeguarding their money. The absence of banks offering mobile payment solutions to their customers presents both a challenge and an opportunity. The challenge here is convincing segments of consumers who are not first adopters or technology enthusiasts to use mobile payment options. On the other hand, the opportunity is the amount of money to be made from the large swath of these consumers. To capitalize on this opportunity, mobile payment providers need to do two things. The first is investing in security that mimics the experience at banks. This includes – but is not limited to – multifactor authentication, out of band authentication, and device monitoring. The second and critical piece mobile payment providers must execute on is clear and concise communication to users on how these security features safeguard user information.
Some may argue added security features provide another barrier to adoption; however, in the early stages of the mobile payment lifecycle, I would argue the opposite.
Any non-bank operating in this space needs to promote confidence in the security of their solution. Otherwise, adoption en mass will never be realistic. And, the more providers can collectively invest and educate on security in the mobile payment space, the more powerful the network effect of adoption will be.
Related: Mobile payments – where are we?
If Virgin can go from being an Indie record label/shop to a bank (via becoming an airline) with a reasonable degree of success then it should not be beyond the wit of any recognised mainstream brand to establish itself as trustworthy payment hub. After all, no one still thinks of Amazon as a bookstore, do they? I’m not convinced Privacy and Security are the big barriers, personally (though I am not saying they aren’t barriers at all). And I think the threat to banks may be that once new but familiar brands establish themselves in the money game via mobile banking they will wonder “why stop here?” and potentially become threats to core banking business too. If Virgin can end up with Northern Rock…all of which is to say that, potentially, mobile money might drive some quite far-reaching re-configurations of the commercial landscape. Just a thought…