Google's announcement of its mobile commerce platform, the Google Wallet, marks a significant step forward for mobile payments, but key local players say it will be some time before it has any local impact.
Near-field communication (NFC) has long been touted as the technology most likely to grow mobile commerce, but has yet to gain significant traction. Analysts, however, predict that with Google's clout, mobile proximity payments could start to gain momentum.
The Google Wallet essentially enables a user's mobile phone to act as a credit card, allowing the user to tap it at a pay point to complete a sale.
First National Bank eWallet Solutions CEO Yolande Van Wyk says she doesn't foresee any real impact on traditional payment mechanisms for some time to come, especially in SA.
“If you think about it, the Google Wallet is simply changing the form factor used for payment at the point of sale. For people to take up a new technology, they must have a real reason to do so, and I don't believe the necessity is there yet,” says Van Wyk.
“We're still struggling just to get mass take-up on the use of debit cards in SA. We're seeing a vast number of people still withdraw all of their money after pay day and use cash for all transactions for the rest of the month.
“It will be a huge leap to get such people to adopt the use of a phone to make payments,” says Van Wyk, adding that mobile payment via NFC in its current form is not a technology for the masses.
Tough space
Herman Singh, CEO of Beyond Payments at Standard Bank, says the Google Wallet will have a local impact gradually, and over time.
“There are regulations to be complied with and, as we have seen with other wallet players, it's a tough space to enter and compete in as the market is already well serviced.
“Wallets are great for convenience and low-value payments. We will first see wallets on cards in really great numbers. So Africa will be a great terrain for this, especially in countries with a large card or phone penetration,” says Singh.
According to Van Wyk, local banks have been developing contact-less payment technology for some time. “NFC technology is not just linked to mobile phones. We have been looking at developing contact-less payment mechanisms for the transport sector specifically.
“Transport could be the one sector where contact-less payments may be taken up on a larger scale in SA - simply out of convenience.”
Adapting to disruption
Some analysts believe the development of mobile payment mechanisms by big players, such as Google, could freeze banks out of card payment revenue.
Singh says such predictions are unfounded and the new developments will rather be complementary to traditional banking in the same way that Internet banking was.
“Banks will continue to create and compete in the new mobile payments landscape,” notes Singh.
“It is important for banks to position themselves to partner these players. Cards deliver a form of payment that works for existing users and the new generation will certainly gradually take to this too.
“We will enable our cards and devices and there will be new entrants. That is the nature of any new disruption and frontier.”
Mobile opportunity
Geraldine Mitchley, business development manager for Standard Bank-powered virtual currency mimoney, says the estimated 45 million mobile phones in SA actually offer a major opportunity.
“This increases online connectivity by three times its traditional penetration and is more than twice the size of the active banking market.
“We have already seen banks partner with mobile operators as sales of mobile phones far outperform the rate of debit and credit cards issued.”
Mitchley does, however, acknowledge that, while there is a drive to provide wallet and API solutions on smartphones, payment innovation on the mobile phone, particularly in developing countries and in SA, tends to concentrate on the movement of cash between sender and receiver.
According to Mitchley, the ubiquitous use of e-currencies as serious contenders to traditional payment mechanisms will heavily depend of ease of use, convenience, security, and low to no transaction fees.
Some hurdles
Van Wyk says a major hindrance for the local uptake of mobile payment mechanisms is the lack of NFC-enabled handsets in the country. She adds that, while the FNB eWallet would potentially work well with mobile payment technology, it would be at least two to three years before it is implemented.
“Stickers that provide NFC functionality to devices that otherwise wouldn't have it are possibly a good interim technology,” Van Wyk points out.
Mitchley believes mimoney will also integrate well with new payment platforms, explaining that it is bank-agnostic and can facilitate payments via NFC card or phone in the virtual space, or at the physical point of sale.
“This is a highly-contested space with lots of IP and who owns the road will toll the traffic,” concludes Singh.
Share