If you are searching for clarity on the challenges facing mobile payments or its future prospects in 2015 and beyond, it's not easy. Numerous reports, blogs and news stories released every month paint a murky and conflicting picture. It's hard to see the wood for the trees when it comes to this particular emerging market. One week Apple Pay is King and the next it's flop. That's to be expected really, because when it comes to predicting the future, the only thing we can be sure of is: we're really not that sure. January has been no different so far - and finding a consensus can be difficult - but let's give it a go anyway.
Security is a major battleground for mobile payments. In some quarters, you will find security is highlighted as the stumbling block for mobile or contactless payments methods. This is no better demonstrated than by the £20 transactions limit imposed on most contactless payment methods. A survey just last month, by Wakefield Research in partnership with Verifone, highlighted this security restraint imposed by the banks is actually supported by their customers as well. Some 84 per cent of respondents to the survey said they would only use their smartphone for small or medium purchase such as a cup of coffee. When it comes to larger purchases, it seems the trust in mobile payments is just not there yet.
It's not all that surprising to me either, especially considering the deluge of cyber crime stories that made the headlines in recent months. And it's an area where education to consumers is vital, because security can in fact be mobile payments greatest strength, not a weakness. Encryption, tokenization, biometrics and device authentication can all be used or combined to make mobile payments arguably the most secure payment method available - let alone the most efficient and convenient.
Despite the perceived hesitancy around security, it's not hard to find consensus that mobile payments are on the rise. Finding agreement on the speed of that rise is harder. In December we cited a Juniper report that mobile commerce would scale to reach 200bn transactions annually by 2019; however another report this month suggests that by the end of this year just 5 per cent of the global base of NFC capable phones, around 30 million, will make contactless in-store payments on a monthly basis. Which seems a pretty big jump from there to 200bn transactions by 2019. But maybe not when you take this into account: The UK Card Association revealed £253million was spent in the UK through contactless payments in September 2014 - a year on year increase of 283.6 per cent.
It's hard to tell who's on the money when it comes to accurately predicting the growth of mobile payments. But even though the signals are mixed, the overall message is clear: mobile payments are on the way. The biggest challenge remains consumer education.
By Matthew Taylor
20th January 2015