Unlocking the m-payments deadlock

The recent report from Arthur D Little, a global management consultancy specialising in strategy and operations management, predicting a 68 per cent per annum increase in mobile transaction volume to 2012 highlights how the mobile phone is one of the most promising emerging payment channels. The claim that developing countries will drive this growth comes as no surprise due to the widespread use of mobile phones in these parts of the world in comparison to access to banking services. In fact, there is a good chance that in nations such as those in Africa, mobile payments will leapfrog the deployment of a physical financial infrastructure such as ATMs or even dedicated Electronic Point of Sale devices. Some proponents of mobile payments go further still, suggesting that airtime may become a widely accepted form of e-money in developing countries.
 
However, there are a number of challenges facing mobile payments at present and its mass adoption, not just in emerging nations, but everywhere depends on the role of banks and non-banking stakeholders in the space. Mobile payments has long presented a dilemma around customer ownership and the debate about whether the bank or mobile operator owns the customer still rages on. While moves have been made to improve cooperation and interoperability in this space, it is clear that more has to be done to unlock the deadlock between these players. Furthermore, banks are showing an interest in driving mobile payments, especially in developing countries where there is an obvious demand and acceptance, but current economic pressures are forcing them to put innovative offerings on the back burner. The present emphasis on fast and clear return on investment rather than implementing speculative projects where the payback might be two or three years away means that any interest in developing mobile offerings is being addressed in a ‘make do and mend sort of way’ by adapting existing systems.
 
The latest research from Datamonitor on the future of the mobile phone as a banking channel indicates that mobile banking is a credible channel and its greatest opportunity involves serving the needs of the unbanked. However, it highlights how IT spending on mobile is not the highest priority channel for investment and that financial institutions and technology vendors must be prepared to play the long game where revenue generation is concerned. Yet cost need not be an issue if banks stop viewing mobile offerings as a stand alone solution and rather adopt a holistic and enterprise approach whereby products can be added and provided off the one platform. By moving away from this silo-based approach, banks can provide the impetus to really drive m-payments and spur its growth further than predictions suggest.
 
It is clear the mobile phone presents many opportunities for financial institutions, as well as being a convenient payment device for the consumer worldwide, but for m-payment services to become the first widespread, cashless transaction system, banks and m-payment providers need to do more to unclog the wheels of supply and fuel the demand.