The players in mobile payment
In the USA it is already possible to pay with your mobile phone since in 2011, when the Google wallet was released, making use of the Near-Field Communication (NFC) chip in your mobile phone. Thereafter came Apple pay in 2014 and a few days ago, Android pay has been launched as the new and improved version from Google. Google wallet will now only handle peer-to-peer transactions and Android pay will work at the payment terminal. It is expected that the final grand player, Samsung, will come with their mobile payment system at the end of September for US users. Combining Google wallet and Andriod pay would’ve given google a unique differentiating position as Apple and Samsung pay will only facilitate payment terminal transactions. Why they didn’t opt for this integrated app remains unclear to me.
Nowadays, the Netherlands stand at the start of a mass-introduction of mobile payment. Even though all major providers in the US have the intention to provide their payment-apps in Europe, none of them wants to give information on when this will be. It is therefore expected that the largest banks in the Netherlands will take the lead in the Dutch market. Rabobank is currently operating on a small scale and ING is providing a trial version for a selected group and is expected to have an app up for business at the end of this year. ABN AMBRO will follow in 2016.
There are three reasons why Apple is not active in the Dutch market. The first has a practical nature, as Apple pay in the US functions with Mastercard, Visa, etc.. but is incompatible with Maestro which is the system from Mastercard whereupon European cards function. Secondly, Apple does not allow banks to install their payment applications on their specially developed chips. Lastly, it is the earnings model from Apple (and all other providers) which is unfavorable for European banks. It is a necessity for Apple to be a player on the mobile pay market in Europe to keep the sales of their products up.
The European banks have a difficult decision to make. They do not want to have their clients snatched off, but their mobile payment constructions can only be viable if they are based on a profitable business model. Suggestions that have been proposed to counter this ‘problem’ include; a monthly fee for the use of mobile payment, transaction costs for each mobile payment or an overall increase in the tariff of the underlying bank account. Honestly I don’t think (Dutch) customers are willing to pay for this innovation, at least at this point in time.
Recent surveys show that the interest in paying with your smartphone is already fairly disappointing. Apple pay is ruling as the market leader, but only 13% of iPhone compatible users have tried Apple pay at least once. The survey shows that some of the main reasons to not use this method of payment are unfamiliarity and security concerns. A global prognoses shows that at the end of 2015, 5% of the total of 600-650 million smartphones worldwide will be geared up with the required NFC chip and will be used at least one a month. I’m not overwhemeld by these numbers,
It is in the Netherlands still relatively new to pay contactless, let alone use mobile pay. The words of opposition that I hear are mostly safety related. Just leaving the costs and safety discussion in the middle, the adoption of mobile payment comes with an additional hurdle, that is privacy. In technology development privacy is always at discussion and I could see why people are apprehensive to give out all their consumer information. Will we trust Apple when they say they will not store the details of our transactions? If there is a way for both providers and retailers to give their customers some mental security, I believe that one day even the skeptical Dutchies will leave their wallets at home.
Author: R.L. de Vries
Student ID: 361372