The multitude of interested stakeholders attempting to break into novel mobile payments (m-payments) markets is holding up the creation of common standards, a leading standards body representative has admitted.
M-payments describe many already existing payments methods, including so-called "digital wallets" which includes software platforms to consumers' existing banking cards and facilities, and other distinct payments services.
At the moment these services are much more popular in the US than in Europe, but an unprecedented number of different players is jostling to gain ground in the market making standardisation a headache.
According to Milan Gauder, the group head of emerging payments with MasterCard Europe, the market for m-payments is changing fast because innovation is shifting from payments methods to the retail experience.
“For example with MacDonalds, there has been an evolution from cash transactions and card transactions to contactless cards, where you can just ‘tap’ the card or the mobile phone,” he explained.
New forms of retail shaking up market
“But now the movement is onto the smartphone, where customers can download an app, pre-order before they arrive, select a time they want to pick it up – even if this is two minutes away – and pay at the same time, without even tapping on a the shop terminal,” according to Gauder.
This revolution in payments is recurring across the retail market, according to Gauder.
Mindful that the landscape for m-payments across the EU is patchy – with few standardised solutions and no cross-border interoperability – the Commission has made specific requests for interoperability in the sector.
Margot Dor, the director strategy development with the European Telecommunications Standards Institute (ETSI) – which has been asked to work towards interoperability in the sector by the EU executive, told EURACTIV that the landscape for mobile payments is even more complex than other payments systems.
Many new stakeholders involved
“Stakeholders include internet, technology, credit card and telecommunications companies, specialist online and physical payment players, commercial and retailers and merchants,” Dor said.
Payments normally flow through the banking system, but mobile payments offer low regulatory entry barriers for new players, and the sector therefore threatens the traditional dominance of banks in the payments markets.
These diverse stakeholders will also have to devise some form of revenue sharing across the platform as m-payments develop – which requires commercial compromises, Dor said.
“We are not designing a new product from scratch, and if we all were then creating a single standard would probably be easier. There are many systems and everyone wants a standards which suits their systems,” Gauder said.
Not all players keen on standards
More challenging, according to Dor, is the fact that some of the stakeholders – such as over-the-top internet service providers – have little incentive to participate in standards making since they are unused to operating within such an environment.
ETSI is seeking to evolve its Smart Cards Platform into a generic, technology agnostic Security platform for multiple market segments to address requirements of several sectors and write technical specifications.
The updated Payment Services Directive (PSD II), published by the European Commission last July, aims to cover regulatory and security challenges posed by a range of new mobile payments services expected to explode onto the European scene over the next two years.
The new rules form part of the Commission’s broader aim to promote a single European Payments Area (SEPA) and will seek to create a more competitive payments card market that reflects the explosion in the use of online and mobile payments.
According to a draft of the new rules, the EU executive earmarked as a key source of concern “the legal vacuum for certain newly emerged internet service providers, such as third-party service providers offering online banking-based payment initiation”.
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