Success of mobile payments dependent on significant infrastructure investment, says Ovum

by | Oct 1, 2013 | IT

Mobile will impact traditional payments market, but its development will not be as smooth as hoped

London, 26 September 2013 – Financial services institutions must gain a better understanding of the mobile payments market, according to Ovum. New research* from the global analysts indicates that there is still confusion about how to proceed in the rapidly shifting mobile payments space. The research highlights that without a clear understanding of the relationship between mobile payments and the existing payments infrastructure, industry players will significantly miss out on the long-term potential of the market.

With the market still in the early stages of development, consumer-facing mobile payments are predominately tied to existing cards or current accounts, meaning that the payment infrastructure underneath the user interface remains the same. This has resulted in questions about the ability to generate revenue from mobile payment systems. Value-added services, such as targeted advertising, loyalty services, couponing, and ticketing will be key to ensuring profitability.

“The level of hyperbole and confusion in the market is increasing. Many existing payment providers and potential new entrants are unsure of how to proceed in an industry that is evolving almost daily,” says Gilles Ubaghs, senior analyst, financial services technology, Ovum. “It is critical that the growing number of businesses, vendors, and service providers gain a better, and more balanced, understanding of the nature of these developments, and how they are impacting and being impacted by existing payments infrastructure.”

Mobile banking is increasing diversification within the payments market. With mobile banking technology rapidly emerging as a key differentiator for retail banks, it is currently a greater investment priority than payments. As mobile banking continues to develop, more sophisticated payment functions are being added, ranging from peer-to-peer (P2P) to proximity-based contactless payment services. It may yet emerge as a central component in the mobile payments landscape.

Significant investment in the necessary infrastructure will therefore be required, particularly for value-added services. These will remain crucial to the long-term success of mobile payments in developed markets.

Ubaghs concludes: “The market is now progressing in several directions simultaneously and existing payment providers need to remain agile and flexible as mobile payment trends develop. The opportunities for mobile payments are significant in all markets, but they will only be achievable through integration with existing payments infrastructure and processes.”

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