Courtesy of NFC Payments Europe Conference

Interview with Alberto Jimenez, Mobile Payments Leader for IBM

By Ritesh Gupta

Mobile payment continues to be one of the hot topics.

IBM, in its latest report Mobile Payments Adoption in Developed Markets, has highlighted that mobile payments have received a significant and increasing amount of attention in the last six months or so. In general, there are two categories of plans that have emerged. The first describes the movement of the existing value chain and its participants to the mobile domain, and the second, usually promoted by new entrants, proposes a massive disruption in the current pockets of profit. A decisive factor for how these different views will evolve is the ability of providers to monetise the services they offer to end-users.

Consumers, too, are increasingly open to adopting wireless data services, including contactless payments.  

For its part, IBM has identified supply and demand obstacles that are hampering the development of large-scale, money-making mobile payments ecosystems that compensate the different value chain participants in a balanced and sustainable manner.

If both supply and demand side issues are solved, IBM sees a wide range of services that end users can adopt in both emerging and developed markets.

“In developed markets, if the right incentives are provided, users will start using their mobile devices for buying goods and services, which is the largest opportunity,” says Alberto Jimenez, who is the Mobile Payments Leader for IBM.

Jimenez added, “We strongly believe that supply-side obstacles receive a disproportionate amount of attention. While we agree that the resolution of these supply-side issues is absolutely necessary, it is not sufficient for the development of the ecosystem. As evidence in emerging markets has demonstrated, the end-user (the demand side) needs to perceive unambiguous, simple, and compelling reasons to adopt services offered by providers (the supply side).

“We define supply-side obstacles as all of the issues faced today by providers to bring services to market: merchant readiness, availability of technology on devices, interoperability, etc. Demand-side obstacles are the ones that prevent end-users from adopting the services (and paying for them),” explained Jimenez, who is scheduled to speak at the forthcoming NFC Payments Europe Conference, slated to take place at The Regents Park Marriott, London (13-14 June) this year.

Developed vs. Emerging markets

There are still quite a few critical issues when it comes to making mobile payment a mass offering.

For instance, in the US, it is being highlighted that consumers must get full protection against fraud, processing errors and merchant disputes in case they are charging their purchase to their mobile phone bill.

 “From our point of view, the key issue - that doesn't get enough attention - is the demand side. For the most part, we don’t see the compelling reasons to change the existing payments mechanisms for new ones from an end-user perspective. Adoption drivers need to be identified,” said Jimenez.

IBM, in its report, has mentioned that Mobile Payments is an industry that first developed fully in emerging markets. The market characteristics of low-income countries provided a fertile environment for both providers and end-users to offer and adopt the services. In developed markets and high-income segments in emerging markets, the circumstances for both providers and end-users are completely different. New payments alternatives need to provide a persuasive value proposition that doesn’t necessarily resolve a pain point, like in emerging markets, but creates a new type of value in the form of direct savings or significantly improved experiences.

Jimenez said in short, for developed markets, the initial adoption drivers will fall into two categories:

(1) Direct savings and

(2) Improved experiences

“Without identifying these adoption drivers, providers will appear to be pushing irrelevant technology to end-users; and investments in solving supply-side obstacles will result in low ROIs,” said Jimenez. “Just like in emerging markets, these adoption drivers will be highly dependent on market-specific conditions and should not be applied directly across geographies, national markets or even client segments. For example, in a Sub-Saharan market, the person-to-person use case served as a very successful adoption driver; however, in a neighboring country the person-to-person service didn’t reach any scale and bill payments is driving acceptance today.”

“While we anticipate a massive business opportunity for mobile payments providers in developed markets in the medium-term, we still see the emerging markets prospect as the immediate one, where both demand and supply issues are better identified and addressed by providers today. In addition, the execution strategies that emerging markets value chain participants need to put in place require less coordination with a multiplicity of powerful ecosystem participants,” he said. “ If the adoption drivers and aggregation issues are addressed by the right participants, we remain bullish about the opportunities in Western Europe, the United States and high-income segments in emerging economies.”

Proximity mobile payments

Implementing proximity mobile payments is complicated by the number of stakeholders that are involved in establishing the eco-system.

The industry is still in the process of clarifying the roles that each stakeholder is going to play.

However, the issuer of the secure element has a special control of the ecosystem, and even though UICC seems to be the more standardised secure element, there are other alternatives and may be they can coexist in the future, says Jordi Guaus, Head of Mobile Payments, La Caixa. “This is the critical factor because at the end of the day the owner of the secure element will want to charge a fee to the mobile contactless service payment application service provider, in other words, to the issuer of the card that is downloaded in the secure element, and depending on the amount of the fee the business case could be positive or not. Another alternative is that the card issuer becomes also the secure element issuer, but this standalone model also has a lot of difficulties. Other critical factors is the lack of contactless infrastructure in a lot of countries and the lack of NFC handsets, even though recently there are a lot of good news about this issue,” said Guaus.

Overall, it is said that it is critical to gauge how should one go about informing consumers how NFC-based mobile payment service works and how should various stakeholders be open about their role to simplify the whole offering for consumers.

According to Jimenez, “This is one of the key supply side issues, lack of coordination among ecosystem participants. We have argued for the role of an aggregator. An aggregator would redefine the orchestration of a mobile wallet in the phone – by providing a single place where multiple payment instruments and service providers can be accessed quickly, simply, and effectively, and where discounts, deals, and awards appear contextually and automatically.”

If on one hand, it is said that consumers are not enticed by NFC capabilities because they don't see a tangible advantage to using these capabilities, on the flip side, it also argued that consumers will adopt whatever technology they are provided that makes the transaction process more efficient and secure. 

Regarding this, Jimenez says, “We should learn from the emerging markets experience. Scale was built on top of adoption drivers and those in developed markets are either direct discounts or improved experiences. Furthermore, we believe only direct discounts can build the initial mass adoption.”

Incentives

IBM believes there is currently a large, unfulfilled role within the developed markets mobile payments and commerce ecosystem: the role of an aggregator. An aggregator would redefine the orchestration of a mobile wallet in the phone – by providing a single place where multiple payment instruments can be accessed quickly, simply, and effectively, and where discounts, deals, and awards appear contextually and automatically.

“The possible services an aggregator could offer are many. One of the most intriguing examples is pulling together deals and discounts into a single view that is both searchable and can be triggered contextually,” said Jimenez.

Another role the aggregator could play is offering multiple payments instruments through a single application for easy access and use. A customer could select from his or her debit, credit, and prepaid accounts in the same application for making a purchase.

This opens up even more possibilities for enhancing the buying experience by helping the customer decide which payment instrument to use based on interest rates, available balances, rewards, and incentives, according to IBM.

Outlook

Jimenez does foresee the acceptance of mobile payments gaining traction in the next 12 months.

“If providers understand the need for identifying adoption drivers and the aggregator role, we are very bullish about opportunity in the short term. Everything will depend on the ability of providers to embrace these concepts and incorporate them in their offerings,” concluded Jimenez.

NFC Payments Europe Conference

NFC Payments Europe Conference is scheduled to take place at The Regents Park Marriott, London (13-14 June) this year. For more information, click here

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David Murdoch

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