Mobile Transaction Growth Outpacing the Payment Establishment’s Ability to Self-govern

Mobile Transaction Growth Outpacing the Payment Establishment’s Ability to Self-govern

Mobile Transaction Growth Outpacing the Payment Establishment’s Ability to Self-govern

Payment companies and mobile technologists alike agree — at least in public, to hide the fierce competition going on behind the scenes In order to grow mobile commerce and best serve the retailer and consumer, there needs to be better inter-industry cooperation in developing standards and in promoting interoperability between mobile payments platforms.

In the meantime, still hurting from the economic downturn of the past few years and seeking to better engage with consumers, retailers are viewing new mCommerce technology solutions as a way to both build its customer base and increase consumer loyalty — to capture new sales while generating more incremental sales.


Mobile Phone Shopping Cart Before Trade Horse

In August 2012, Google, PayPal, Verifone, the US Carriers, Capital One and the major US banks formed the Mobile Payments Committee within the Electronic Transaction Association (ETA), with a stated objective of “Enhanc[ing] business relationships and network interoperability among merchants, card brands, networks, equipment manufacturers, and financial institutions.” Today, the committee has ballooned to 107 members (the next largest ETA committee – Government Relations – has just 41 members) and does not include the payment innovator Square. Within a year, the committee published Best Practices and Guidelines for Mobile Payment Solutions (September 2013), and is expected to continue to advise the merchant-acquiring payments industry as mobile commerce becomes more widespread. But can the trade organization-delivered advice keep up with the fast past of mobile technology advancement and the implications that it has for merchant adoption and consumer behavior?

New technology offerings focused on mobile payment ubiquity continue to pop up, launch and take off at spectacular speed – driven by merchant need and consumer acceptance. After raising just over $123,000 from nearly 1500 backers on Kickstarter, mobile payment enabler Loop raised $10 million in funding (November 2013) and is already offering a $39 fob to consumers that allows you to store all of your credit and gift card data on one device, and to pay wirelessly at the store once the small 2.5 inch fob is attached to your phone. Due out in April 2014 is a more elegant and functional, but also more expensive Loop solution at $99 per unit — a phone charging case that acts in the same way as the fob, but which sits flush to the phone. And of course Square just continues to explode — launched in Q1 2010, the company processed approximately $20 billion in transactions in 2013, and expects to reach $30 billion this year across more than across more than 200,000 merchant locations (including 7,000 Starbucks cafes), and an undisclosed number of Whole Foods nationwide. Significantly, Sarah Friar, Square’s CFO and Operations Lead stated at this month’s Women 2.0 conference in San Francisco that contrary to popular payment industry belief, the service’s transaction size range is quite large – with $1,000+ purchases coming from a diverse set of payees such as landscaping companies, pest control firms and artists.


Restart, After Restarts on the Standards Front

Whilst mCommerce on the retail level continues to grow exponentially, the payments establishment is still tending to practical issues such as the development of uniform security standards. In the UK alone, IMRG and CapGemini’s e-retail index showed that a “tipping point” was reached in terms of m-commerce in 2013, with mobile transactions increasing 135% over 2012 and now accounting for all e-commerce growth on a year with an overall 18% growth in online transactions. In December 2013 alone, 27% of online sales came from mobile devices, equating to approximately $4.96 billion USD. In the larger U.S. market, similar rapid mobile transaction growth is cited, with the most recent Internet Retailer study stating that the top 500 mobile retailers reached $34.2 billion in mobile sales in 2013, up 64% from $20.9 billion in 2012.


At the most glitzy, if not the most well-attended payments conference Money2020 last fall, there was much talk surrounding the development of standards governing key issues such as the storage and transmission of PII (personally identifiable information). Credit card payment verification and ID validation company Jumio (ex-Facebook Edward Saverin is a board member, lending his name and investment dollars) announced an effort to jump-start a member-owned and operated association focused on PII. What is interesting about this development is that the relatively young company Jumio felt the need to take it upon itself to nudge the industry about an important security and privacy issue. When questioned about this, Jumio CEO Daniel Mattes stated that it was there intention to start the initiative in the hopes that the greater establishment would take the subject on and carry it forward.


And the nudge should be well taken. mCommerce security is becoming a more pressing issue, with hacker-criminals migrating to the mobile transaction arena as security and best practices in the online arena become more robust, better understood and widely practiced. At Money2020, Jim McCarthy, Visa’s Global Head of Innovation and Strategic Partnerships expressed a new willingness for Visa to work with other vested players in the payment space, and showcased a new alliance between the company, MasterCard and American Express to propose to the industry the creation of a global token-based standard for making online and mobile transactions safer and easier for the consumer. There’s been no update on the alliance since the press release and announcement last October, but it’s safe to say that the growth of mobile transactions is outpacing the ability of traditional financial institutions to safeguard and govern the m-commerce space.

Kris Yee


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