Faced with growing competitive threats from non-traditional sources, such as alternative payment providers, banks around the world have aggressively swung their attention to emerging mobile platforms to defend their payments revenues, according to a new report from KPMG International.
Adding to the urgency, 84 percent of banking and financial services (FS) executives said mobile payments will have significant importance to their business within the next one to four years. Furthermore, 73 percent suggested that mobile payments would be mainstream within the next four years.
“Leading banks are working feverishly to stay ahead of their peers and the new players in this space by developing mobile payments solutions, getting actively involved with standards setting, and partnering with other players in the mobile payments value chain such as merchants and mobile network operators,” said Carl Carande, national account leader of KPMG LLP’s Banking and Finance practice. “It remains to be seen whether the banking industry establishes enough of a foothold in the mobile payments space and maintains its share of payments revenue.”
New Competitors Vie for Market Share
The KPMG report, entitled Monetizing Mobile: How Banks Are Preserving Their Place in the Payment Value Chain, cited the potential of mobile network operators working with device manufacturers to develop a system independent of the traditional payment infrastructure. Others, however, foretold of an even more serious threat in the form of new market entrants, such as specialist online payment players and online service provider giants.
Nevertheless, banks are still perceived to have an edge, according to executives from the technology, telecommunications and retail sectors who also participated in the survey. These executives overwhelmingly agreed that banks will likely continue to play an important role in the evolving mobile payments value chain.
Significant Challenges Ahead
Survey respondents highlighted a number of significant and evolving challenges that are hampering the adoption of mobile payments. More than 70 percent of banking and FS executives cited security concerns as their biggest challenge, an issue that has only been accentuated by a spate of recent high-profile online security breaches.
“We believe that if banks can roll out a safe, easy to use and ubiquitously accepted system, consumers will very quickly adopt mobile payment solutions as they have other mobile services,” said Mitch Siegel, a KPMG LLP Financial Services practice principal focused on payment advisory services and co-author of the report. “But adoption will also be driven by demand as consumers increasingly look to use their mobile devices to accomplish everyday tasks such as buying their lunch or paying for a taxi.”
The survey also revealed that a lack of technology standards and infrastructure are also posing major barriers to the wide-spread roll-out of mobile payments. And while very few respondents to the survey were willing to categorically endorse any single payment technology, most pointed to the emergence of Near Field Communication (NFC) as the technology with the most promise and ease-of-use for customers.
Corporate Mobile Payment Services
Commercial banks also are showing a growing interest in utilizing mobile platforms as a key differentiator and potential revenue generator.
“Many innovative banks are finding that they can actually drive revenues from their mobile offerings by bundling enhanced corporate services, such as cash management tools and key back-office functionality for their corporate clients,” added Siegel. “Mobile payment solutions can help these clients by speeding up and automating authorization procedures related to reviewing and approving payments.”
About the Report
In compiling the report, KPMG surveyed executives and mobile channel leaders at more than 145 retail and commercial banks, payment processors, acquirers, card services providers, retailers and payment technology vendors, and also conducted in-depth interviews in the first quarter of 2011.
More information: Monetizing Mobile: How Banks Are Preserving Their Place in the Payment Value Chain
Source: PR Newswire / KPMG