With a 110% mobile penetration and nearly 60% of smartphone users, Spain has all the numbers to make mobile payments a reality very soon. A recent study from Forrester Research showed that despite the high mobile penetration in the country, only 13% of users use their mobiles to make purchases, although the number is growing and some big retailers already have a bigger share. Additionally, other reports highlight that 23% of SMEs are planning to implement mobile payments in the coming months.
Furthermore, we also see the big push of NFC technology in the country, and since its pioneer trial in Sitges back in 2010, the total rollout of contactless POS is currently over 300,000, where Comercia Global Payments (Caixa) owns more than a third of these. Other players such as Orange Cash, Vodafone Wallet, and Caixa Wallet in partnership with the top three Spanish telcos have also entered this market.
One particular thing made telcos more active in payments than most banks in the past few years is GSMA’s push and lobbying efforts. In fact, I am sure we will hear once more in the following dedicated events that the year of mobile payments is coming; however, many things must change for this scenario to become a reality. Telcos are losing ARPU (Average revenue per user) in messaging services and potentially some of their user base over the traditional voice services due the proliferation and consolidation of OTT services such as WhatsApp. Therefore, it will be interesting to see what telcos will bring to the table to overcome the compelling HCE technology with its secure element in the cloud. This technology and the newly launched hybrid NFC approach from Apple Pay seem to have threatened the dominance of the SIM-based NFC model. Interestingly, Visa and MasterCard have leveraged on this new cloud initiative and have backed it up with the next revolution in the payments and risk industry: the Token Service, infuriating perhaps many telcos which will have to push even harder for a piece of the payments pie from a different angle.
For instance, we see how the BBVA Wallet app with over 300,000 downloads is a great success so far in the deployment of HCE technology. We also see how Bankinter and Bank Sabadell are also pushing with similar initiatives, which confirms that HCE with tokenization has indeed helped many banks to make their move in this field. Another interesting note is that despite the bad reputation banks have in the country, consumers seem to trust them more when it comes to payments, which adds another ingredient to this exciting “war”.
Even more, telcos also have a grasp on the growing market of direct carrier billing, where according to DIMOCO, the digital content market (publishing, gaming, video, and music) in Spain will reach EUR 1452 million by 2017. Recent changes in carrier billing regulation lead by Boku (participated by Telefonica), which FCA granted in 2012 an eMoney Licence, will not only allow them to sell physical goods, but act as another e-wallet such as PayPal. They will definitely be pressured to lower the current high processing fees (25% to 40%), leaving DCB in a better position to fight the HCE effect.
On the other hand, another recent initiative launched by most of the major banks called iupay was created as a possible competitor to PayPal, but is still far ahead of being a threat. Up until now, it acts as a digital wallet to store and use credit cards when buying online with other features such as choosing installments payments.
Yaap is another example, the recent JV of Telefonica, Caixa, and Santander, which is not tied to NFC yet, but has developed two products so far. One of them is Shopping, which could be seen as the new Groupon competitor, where merchants promote their offers and users can easily make use of them when paying with the card linked to their account. The second is Money, a free P2P money service for sending or requesting money to friends for small amounts.
Wearables are also here to stay, and once again, leader in innovation, Caixabank, has been a pioneer in launching a contactless wristband. Lastly, it is important to mention that many mPOS solutions that are found in Spain (Caixa, Adyen, iZettle, Monitise, Ingenico, etc.) will also play a key role in adding value to retail merchants in terms of loyalty, data analysis, and wallet type of services. They can be the right choice due to their versatility and flexibility in adopting any form of mobile payments (QR, NFC, BLE, etc.), or the simplicity of updating them from the cloud, as opposed to traditional POS.
Given all the product and business developments in the industry, there will be plenty of opportunities in the coming years. This hype is more obvious since the appearance of HCE where many players will want to leverage on the cloud to offer services such as loyalty, risk, and identify management solutions. Other practical improvements can play a key role, such as fixing the battery problem or perhaps mobile wallets aggregators that include biometrics and a single sign-in feature.
To conclude, we can say that the mobile payment “war” will continue under the promise of very low margins in the area of payments acceptance. Nevertheless, we must not forget that the biggest honeycomb is in all the data, identity, and fraud related services that are needed to manage a very complicated and fragmented ecosystem. Since everyone wants to create their own ecosystem, we are also missing out on the real challenge, which is to offer value to merchants and consumers, as well as having a global harmonised regulatory framework, which can push for better security and deployment across the whole value chain that mobile payments will bring to our society.
Otherwise, we will all be a lost token in the cloud in search for a secure place to be redeemed.
About the authorJesus Perez Batlles has built his career and expertise around payments and fraud management. His work as a consultant, advisor, and a WayVent partner spreads across different industries in retail, gaming, finance, and technology. Hes passionate about influencing and changing the ecommerce landscape by leading and developing partnerships, new business, internal capabilities, and strategies across the digital ecosystem.
Company description WayVent is a network of experts and independent consultants who work across all sectors of B2B and B2C to help companies build and develop brands, strategy, operations, and ecommerce solutions. Rooted in the culture of collaboration, the team leads projects by bringing in multichannel marketing, ecommerce payments, fraud management, big data, technology, and industry-specific expertise.
Please also find my profile on: http://www.wayvent.com/jesusperez
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