Non-European countries are rapidly improving their citizens' ability to pay for goods using their mobile phones, writes Elodie Franceschini, director at TNS Technology.
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Although there have been promising trials in the UK, concerns over privacy and security may delay the rapid take-up of m-payments.Despite consumers' fears, markets are preparing, if slowly, for widespread m-payment systems.
Juniper research predicts that consumers will spend more than £150bn by 2013 via mobile devices for goods such as e-tickets, books and DVDs. This offers both mobile operators and service providers a potential new income stream, and current economic trends may even hasten its introduction.
M-commerce in Europe
Last month mobile network operator O2 announced its pilot scheme to trial near-field communication (NFC) technology (the key technology to enabling m-payments). Its partners are Barclaycard, Nokia and TranSys, the consortium behind the current Oyster card system.
Said to be Europe's largest trial of NFC technology on a mobile phone, the study ran from November 2007 to May 2008. O2 gave 500 Londoners NFC-enabled handsets, each loaded with £200, to use in place of Oyster cards on London Transport and in participating stores including Books Etc, EAT and Threshers.
At the end of the trial, nine out of ten participants said they were happy with the technology and 78% said they would be interested in using contactless services if available. Exciting news for mobile phone manufacturers was that 87% of subjects said having an Oyster payment service on their mobile would influence their next handset choice. Similarly, 47% said having phones that allowed them to make m-payments at retail outlets would influence their choice of phone.
Mobile network and financial services firms are beginning to realise the huge untapped potential of this market. They are starting to look seriously for ways to co-operate to develop simple, secure and interoperable m-payment systems. The Mobile Payment Forum, a global cross-industry alliance, was launched in 2001 to address the technology challenges. But are consumers as ready for it?
Consumers in Europe are unconvinced, TNS has found. In the UK, only one in five would now consider using their mobile phone to pay for purchases, compared with 46% in Vietnam and Korea. In continental Europe, interest is even lower, with only 13% of people in Germany and 9% in Spain willing to test the technology.
Several m-payment options are now on test:
• Cashless one-touch, where shoppers swipe their handset against an in-store reader, appeals to a quarter of Brits and is the most popular m-payment method.
• Barcodes for phones that link back to customers' bank accounts have also been wellreceived.
• Text messaging, which asks shoppers to send a text to authorise payment, and web transfers, where consumers use their mobiles to go online and confirm payments while shopping, don't rank highly. This may be because they are seen to compromise the ease and speed of use of m-payments.
Barriers to adoption
The technical applications themselves aren't really the issue. Trials and tests are under way worldwide Visa has plans to develop applications for Google's Android handsets and groups such as the Mobile Payment Forum ensure that technology issues remain at the top of the agenda.
What worries UK consumers is security. They believe the established payment infrastructure in Europe and current payment methods are relatively safe. As a result Brits and Europeans trail consumers in the developing world in adopting m-payments.
Having all their banking information on a single device that is easily lost or stolen makes most people edgy. Around two-thirds (64%) believe that m-payment would make mobiles more attractive to thieves. Some 58% say that they would fear losing their phone, which they equate to losing all their bank cards at once. Although UK consumers are growing used to having lots of applications on one device (thanks to smartphones such as iPhones, Blackberries, etc), they prefer to keep their financial information separate - and safe.
The future of m-payment
It is clear that the supply side operators will have to address consumer confidence urgently. Marketers and advertisers should look to South Korea and Japan. There banks, handset makers and retailers have worked together to deliver a sales proposition based largely on their own faith in these technologies.
In the UK, where security concerns and scepticism are rampant, the introduction of m-payment technologies should focus on building trust. This could be done incrementally. A first step would be to introduce customers to mobile banking before introducing them to pre-paid small purchases. This worked in the O2 trial. It lets suppliers hammer home the point that mobile transactions are as secure as more traditional methods of payment. Clearly, once consumers start using m-payments, much of their fear will disappear.