Here’s why mobile payments are bit like everyone’s favorite orphan child

Mobile Payments

The ups and downs of an emerging industry

A bit like Pip from the novel “Great Expectations,” an orphan who experiences an uncertain life with an uncertain future but with great expectations, the mobile payments (M-Payment) industry has seen more than its share of ups and downs. Pip starts off poor and desperate, finds some benefactors, prospects look much better but how will it end? For the mobile payments industry, will it find a happy ending?

The promise of mobile payments has been around for a long time. Since we began to look at mobile handsets as much more than simply mobile phones, there has been an expectation that payments would be a natural extension. It is a device that is with users all the time and stores technology that can measure and generate an invoice. It seemed possible that mobile operators would become the new credit card companies and handset manufacturers would be like the guys that make the cards. Oh how our lives would be better and simpler.

Players big and small rushed into this industry a decade ago. The big credit card players like VISA, Mastercard and AMEX are looking to extend their card services into mobile payments. New players like Square, Braintree and Google have come to the party based on strong online capabilities.  Most recently Apple launched Apple Pay in an attempt to disrupt the payment industry much as they did in the music business with digital downloads.

Mobile banking services could be extended to the unbanked

What has been accomplished in the last 10 years to bring M-Payments to market? Like Pip there have been ups and downs. One of the big ups has been the success of M-Pesa in Kenya that has proven mobile banking services could be extended to the unbanked. This has been a huge positive impact in the developing world where most people have mobile phones but do not have bank accounts or access to traditional banks.  There have been some positive developments in the developed world where M-Banking services are now quite widespread. But while people are using mobile technology to review bank accounts and make online payments there has been less progress on using mobile in traditional retail settings.

Now that Apple has come to the party, should we expect massive changes?  Apple has proven disruptive in other industries so it is possible that their market power could sway the day. One group Apple will need to get on board will be the retailers. Apple will need these guys to buy into Apple Pay and add the POS terminals needed to accept payments.

Apple might have minimized some competition by cooperating with the credit card companies as it appears that the initial Apple Pay product will incorporate credit cards into the ecosystem by using them to load the M-Wallet. But at the end of the day, Apple will need to convince consumers that there is a reason to use Apple Pay over other established payment systems.

In more developed markets consumers seem to stick with what they know

So how has Apple done to date with Apple Pay? Not so good, according to research by InfoScout only 6 percent of iPhone 6 and iPhone 6 Plus owners have actually tried using Apple Pay in stores while 85 percent have not bothered with it at all. It is possible that take up will improve with more retail participation and certainly Apple could offer “sweeteners” to get users to try.  But early results indicate that many users are just not interested in buying products with their phones.

Recently, Google got into the game with Android Pay that may even trump Apple Pay. For starters there are many more phones out there running Android than run Apple’s iOS. Additionally, recent feedback on Google’s offering is quite encouraging. Google has integrated other merchant’s rewards programs into its offering that will offer more choice in how the user buys and passwords are more user friendly.

So while success has been seen in the developing world much less has been achieved in the developed markets. This is mainly due to financial options and the presence of established credit card players. It seems where there is financial friction in the market, M-Payments look to be viable. With little financial friction in more developed markets consumers seem to stick with what they know; cash (ATMs), credit cards, debit cards, etc.

Will we see a shift in the near future? This remains to be seen as most consumers still use traditional payment systems. But like Pip, the story is evolving and it is hard to say where it will end up.