Mobile Payments has been dubbed the Future of Money and the conventional wisdom is that this is how we will transact in the years to come. When we analyzed the global Mobile Payments opportunity in our first Citi GPS: Upwardly Mobile report back in March 2012, we provided a good description of a variety of topics related to Mobile Payments. The past six months has been heavy with news flow indicating that there are now wider choices than before in Mobile Payment and these announcements have also given us better clarity on what can and cannot work. Subsequently, we’ve found that there is a need to address questions that go to the heart of what is changing within Payments. In this report, we focus on eight questions that address the issues of business model evolution, technology and adoption:
- Processing "Rails" and Transactions – Do Mobile Payments alter the traditional 4-Party payments system? If yes how?
- Incumbents and Their Actions – What are incumbent card networks doing to adapt to the rapid changes brought by Mobile Payments?
- Targeted Offers and Data Ownership – How will the adjacent "Targeted Offers" market develop? Who owns the underlying data?
- Ecosystem Evolution – What will the Mobile Payments ecosystem look like?
- Technology Choice and Timeframe – Which technology is likely to win and become the global standard? Will it be the early leader, NFC (Near-Field Communications) or will cloud-based or other solutions win? When will the infrastructure be in place for widespread Mobile Payments?
- Global Standards and Regulation – Will a global Mobile Payment standard emerge to address regulation, security and privacy concerns?
- Mobile Wallet Attributes – What are the desirable attributes of a Mobile Wallet?
- The Holy Grail: Consumer Adoption – What will drive consumer adoption?
We find most importantly, that mobile payments could simplify and alter some elements of the traditional four-party payments system as information and interaction increase in importance, versus the actual payment transaction itself. The type and timing of technology is still not clear but what is clear is that in the last 6 months, new and credible non-NFC solutions have emerged. Infrastructure must be upgraded to enable Mobile Payments for any technology that becomes the global standard and the timeframe will be technology dependent. Merchants may very well wait until there is more clarity on technology before making investments towards adoption. Finally, we believe consumer adoption will depend on the presence of a “killer app” – an app that is simple for both consumers to adopt and use and is widely available.
Although we are now able to hazard a guess at the lay-of-the-land for a future Mobile Payments ecosystem, we still look for a multi-year path to reasonably widespread adoption. It may be a long and winding road, but every day brings us closer to reality.