Mobile payments continue to make significant inroads. However, there is a widening gap in what they offer and how they are used in two very different contexts.

The developing world has taken clear leadership in this space, mainly because mobile payments are filling the gap for the absence of more conventional financial services. Very large segments of the population in developing nations are simply unbanked while on the other hand the very low cost of mobile phones, the broad spectrum of services that they enable and the high level of network coverage make mobile payments ubiquitous, even in rural areas.  Telecom operators partnering with payment services companies have taken advantage of this situation to become the main providers of financial services, including payments for trivial and small items such as bread and milk, not to mention P2P transfers.

In developing markets even online payments are made with mobile phones because in some of these countries computers are still unaffordable and internet connection levels are still very low.

This environment is driving innovation and turning companies operating in this industry into technology and market leaders; it is an all round great success story.

The context in the developed world is totally different. Everybody has a bank account, there are ATM’s on every street corner and cards can be used to pay for everything everywhere. Mobile payments are not required to provide basic financial services which already exist. They have to compete for market share with a well established infrastructure that has saturated the market and in some instances has over supplied. This is the main reason why mobile payments in the developed world have a much lower penetration and are growing at a much lower pace. In an attempt to overcome this hurdle and boost the rate of adoption, payment systems providers are bundling mobile payments with other value adding features.

Geolocation services paired with mobile payments solutions are emerging as one of the most promising such marriages in terms of growth opportunities and value creation for merchants and their customers.  

These services are brought about by the established mobile infrastructure and ubiquity of mobile devices, as well as the surging and low cost NFC and Bluetooth Beacons. This combination allows for personalized content delivery to consumers virtually anywhere. Mobile payments tie it all up because this personalized content can translate into an immediate response from the consumer, meaning instant sales for the merchant. There are real benefits to the consumer too, in terms of convenience, enhanced access to products and services and actual cost savings.

Whilst geolocation with mobile payments have widespread potential, there are two industries for which this is particularly relevant, namely retail and hospitality.

These are just some applications offering new and promising opportunities:

-          Navigation. Navigation through the customers’ mobile device can be used in multiple contexts; helping the customer finding a particular retail outlet in a shopping mall, finding a particular item in the store, finding a friend or helping staff finding the customer.

-          Content delivery. The big news here is personalization. The authentication inherent to a payment system provides secure customer identification. Linked to accurate location enabled by beacons, this feature facilitates delivery of personalized content either through the customer’s mobile device or through external digital signage. Purchases can be completed inside the content with one-click payments.

-          Augmented world. One of the disadvantages that brick and mortar stores face when competing with online stores is their inability to display a very large range. For an online shoe retailer, for example, the only difference between a range of 10 shoes and 10,000 is one of data entry and even that can be automated. There is no other significant cost difference. For the brick and mortar shoe store however, 10,000 pairs of shoes on display is probably not a viable proposition. On the other hand the brick and mortar store retains one major advantage, in that the customer can actually hold the shoe, smell it, put it on and walk around to see how it feels. Beacons can identify the exact position of the customer in the store and display the extended range of that particular shoe style on the customer’s mobile device or on the nearest screen on the wall. If this is a regular customer suggestions can be made based on the buying history. This is the best of both worlds and once again the purchase can be completed with payment inside the content.

While this is an interesting story and it can deliver real benefits for both merchants and consumers alike, the obstacles facing deployment of these solutions are far from negligible. Firstly they require a significant change in consumer behaviour matched by an equally significant commitment in time, effort and money by the merchants to fill the gaps in the infrastructure. While there are many recent examples of dramatic consumer behaviour change driven by technology, there is never certainty that it will happen again and again in every possible scenario conceived by technology companies. Merchants must see these features as sales and marketing tools that facilitate a higher level of service and customer engagement and ultimately result in more revenue but this is also easier said than done. And last but certainly not least, there are some very big brands in the financial services world that see these innovations as disruptive and a threat to their current dominant position and are therefore likely to offer some resistance, for which they usually enlist the help of regulators.

On the other hand there are also some big brands in the mobile industry that want mobile payments to succeed. It will be interesting to see how this tussle will play out in the next two or three years.


Carlos Piteira