Confusion in the Mobile Payments Market

I don't know whether to be concerned or pleased that 100 million of us may be paying by mobile by 2011. The Gartner report suggests that:

• wireless application protocol (WAP), - requiring software and  expensive data connections,
  

• unstructured supplementary service data (USSD) - text based and potentially insecure even with extra software,
  

• and near field communications (NFC) contactless - the strap-on smartcard,

In almost the next sentence it is suggested that Western countries with a more concerned attitude towards security will lag behind. This implies correctly that the above solutions leave a lot to be desired when it comes to security. I find it curious that Asia should be likely to uptake these services in any great numbers - especially when considering the Unisys 2008 security survey showed concern over fraudulent use of bankcard information is the number one or number two concern in all 14 countries surveyed and is highest in Hong Kong, Brazil, Singapore, Malaysia and Germany.

Seeing that Hong Kong, Singapore and Malaysia are in the top 4, I wonder why Gartner assumes Asian's will ignore their strong security concerns to adopt less than secure solutions. Surely if there is any place such a system might find traction, it would be Italy, which was the least concerned out of the surveyed countries.

The assertion that "contactless payments will pave the way for cell phones and handheld computers to become 'electronic wallets,' packed with consumers' payment and merchant cards, coupon offers, even medical records", is even more flawed. It won't take too many breaches of people's personal data to cause a rapid loss of popularity of this idea.

The methodology is flawed. We have just recently been shown that the most securely protected encrypted laptop is completely at the mercy of hackers and will spill it's secrets very easily to a thief or hacker. How is it that mobile phones will be any different? Gartner cannot be suggesting that people be encouraged to carry all their medical and private data around on their phone? 

This paragraph of the Gartner announcement from James Van Dyke of Javelin is particularly dreamlike in its optimism -

"But consumers won't benefit until the primary players - card networks, financial institutions, mobile carriers, merchants and handset manufacturers - work together toward a unified, simple solution that lets everyone win."

Well that's all nice and cosy but implies that a coffee shop might pay the water board a share of their coffe sales because the water board deliver the water, an unlikely scenario and it's just as likely that the leading banks will remain in the lead if they let telcos become their partners in transactions. Do they currently pay the telcos a share of the ATM fees - or do banks pay for their communications as a service like plumbing, only electrical/data plumbing?

I think it is an unrealistic and dangerous precedent to set in the financial industry and predict the demise of such participants and partnerships.

Telecommunications is a utility infrastructure, like electricity, plumbing and sewerage, not a partnership. The other reason not to do it is because the methodology is flawed and forces you to trust the telco and every one of their employees as though they were the bank's employees. Ridiculous. Banks are already having enough trouble with their own employees.

To expect that the financial industry, merchants, telephone manufacturers and telco's will all get together as one happy family is about as likely as the record companies and retail stores getting together to sell music online in 1997. They didn't, and look what happened to them and I doubt the lesson will result in the banks doing anything different.

It only takes one major player to jump the gun while the rest are holding committee meetings, and waiting for the consumers to buy the new phone they'll need for whatever system it is eventually decided upon and it's back to square one. It may take years and by then the market will be dominated by the early movers - possibly the obopays and paypals (except they are hardly offering ubiquitous or secure solutions).

The other danger is that they'll adopt an ad hoc approach, suffer major security incidents and ruin the medium for everyone. What'll they do then?

Gartner hasn't really delivered the goods with this report and it certainly doesn't help banks any.

The suggestion that banks take on the telco's as partners is the worst I've heard yet.