Retail digital talks to Terfel Roberts, managing director of Danal CS&F, about what retailers should know about the state of mobile payments.
Q: For retailers looking at mobile payment options the landscape must look quite fragmented, with many services being offered. Do you see this model continuing, or will we see the market consolidate around a few successful services?
A: The past six months have seen a plethora of mobile payments and mobile banking services brought to market. Operators, banks and technology providers are all investing heavily in this channel to open up new revenue streams but there is a distinct lag in end-user adoption. Part of the problem is that the options being offered to consumers at the moment are too limited. Operators are asking end users to set up mobile wallets so that the card service providers can make the most of their existing relationships. This begs the question of why consumers should be asked to set up yet another account when they already have an established relationship with the end user via billing? Over the next few years I think we’ll see that the most successful services are those that not only strike a careful balance between ease of use and security, but make life a lot simpler for the consumer. After all, at its heart, mobile payment should be primarily about convenience.
Q: What are the main restrictions and limitations within mobile payments at present?
A: Depending on whether you are a retailer, operator, or consumer, there are a number of different restrictions and limitations affecting the mobile payments market. For both companies and consumers to get the most out of mobile payments, credit limits, payout rates and regulation would need to be lifted or amended. Despite being convenient in certain situations, NFC and Premium SMS are still limited in terms of what they can offer consumers. For example, with NFC, the consumer must be near the PoS or else the technology becomes useless and it only allows purchases up to £15. With PSMS, consumers are unable to review, query, or cancel transactions, and also have the risk of being double taxed.
The limitations for the retailers on the other hand centre on having to update their payments software and install a PoS system. This is a costly move and only offers one channel of in store payment. Operators also face limitations, as regulation is slow to keep up with the pace of technological change and this has the results of slowing the progression of the whole industry. The point here is that at present, there is a sheer lack of flexibility and ease of use for consumers when it comes to mobile payments.
Many in industry believe that until there are standards and agreed processes in place, the high number of different payment technologies and industry participants means that the roll-out and adoption of mobile payment services will be slow. However, historically, standards have proved too slow to keep up with the fast pace of technological change in the mobile industry, and are out of step with consumer demand. This lack of consensus is threatening to paralyse the mobile payment industry before it even gets off the ground in the UK and rather than seeking to standardise, the industry should instead be looking at faster alternatives, or the immediate benefit to the customer will be lost.
Q: A concern often mentioned when discussing mobile payments stem from customer safety and security? Firstly, do you feel these concerns are justified, and secondly, what strategies do you think can be put in place to solidify the process and ease consumer fears?
A: Incidents of hacking and internet security breaches appear on a regular basis, and companies would be doomed to fail if we did not take it seriously. Many online firms ask consumers for personal details, such as credit card, bank details, home address etc, all of which could have disastrous consequences for the consumer if not held securely.
The solution that we’ve found is not to hold any of that information at all; instead we rely on the systems which hold all this information, such as banks, credit card companies, or mobile carriers. We link directly to them and extract the information we need for each transaction. We do not keep it, so customers using our service know that all their personal information is maintained within the companies who have it already and have kept it secure for many years.
Q: How do you see the role of mobile payments in the industry developing in the future, and what are the trends that retailers should look out for in the coming years?
A: Consumers today have a number of places they are comfortable with their finances being managed, typically the banks, credit card companies, or cash under the bed. In the medium to long term it is unlikely that this will change. Consumers also need to purchase items from a number of places, namely web sites, mobile apps, app stores, shops etc. The trick for the industry is to enable consumers to use the methods of finance with which they are comfortable, but use an interface which is useful in all the places they need funds. This will enable consumers to manage their various sources of finance, and use their money in any of the various sales outlets they use. In the long term the industry will consolidate around companies who can achieve this, however safe guarding the money under the bed may take a little longer.
Retailers are going to see people wanting to use more than just a method of payment or bank account, and this includes mobile phone billing and utility billing. What they don’t want is a difference experience for each, or an entirely different service which they have to sign up to.
There has been a headlong rush recently to make spending money as easy as possible with one-click payment online becoming the commonly heard mantra. However, there is often a trade off which results in less security, or utility. For example, contactless cards sound great, but they are no longer PIN protected, and have a £15 limit. It’s only a matter of time before online payment methods start to move into the offline world; in Korea they have been using the Bar Tong app for the last three years, to enable people to make payments in stores via a barcode which is then charged direct to their mobile phone bill. Over 30,000 people are using this service today.
Q: Finally, how does Danal separate itself from others in such a competitive industry?
A: After twelve years of direct to mobile experience we believe we have a proven technology solution to mobile payments. Rather than PSMS, we use direct to bill technology, which allows our platform to process transactions at the same level of security as the banks. We plug into existing, secure systems, without holding any of the payment details to ensure that we are the low risk technology of choice for any financial institution, carrier or merchant
Danal now has partnerships with some of the world’s largest mobile operators. They can trust us to operate through their services and we hope that resonates through to consumers who are weary of paying by mobile.