Given the degree of ‘cool’ with which Apple endows nearly all it does, it’s easy to forget that just a few years ago, NFC based mobile payments were viewed as a missed opportunity, strangled at birth by the inability of banks and MNOs to agree business terms. Now, thanks to HCE and to Apple Pay, they are at the centre of the fiercest power plays in the financial services industry. Other OEMs are rushing to join the party and new announcements about mobile payments are made almost daily.
This paper contends that banks can learn much from what Apple, Samsung, Google and potentially Microsoft are doing with mobile payments today, what their strengths are, and in particular from how the main OEM[1] players vary in their control of the mobile device, software and retail environment. Apple appears to have firm control over Apple Pay and its place in the payments ecosystem. Google is extending control over data use and bases its business model on data.
While this situation leaves banks with much to think about, Mobey Forum suggests that banks cannot afford to delay acting much longer. At stake is not just a place in the mobile payments ecosystem but the future of their customer relationships.
In addition, banks should consider other questions such as:
- The potential impact of current regulatory trends
- How the major payments schemes, together with their offerings, may evolve
- The future of HCE on Android
- Why value added services matter
- The fickleness of consumer opinion and
- The security of tokenisation
The answers can then help banks as they decide how to proceed. However, any decision must be based on a fundamental shift in bank attitudes to the profitability of mobile payments. Instead of expecting a significant return on investment, banks could view mobile payments as a loss leader, the price of keeping them in the game.
Mobey Forum has identified a range of strategic options for banks that can be condensed to two. In order to retain the customer relationship, a bank needs to offer payments via their customers’ smart devices or alternatively choose a future as a back office utility.
