According to the global analyst firm Ovum, there will be increasing complexity within the mobile payments ecosystem this year, and ongoing challenges around the business model for digital wallet services. The net result is that revenue growth for mobile payments in 2014 will be slow and steady rather than spectacular, at least in mature markets.
Ovum expects continued technology and service innovation, notably around location-based applications, in the mobile payments space in 2014. However, there are still outstanding issues around consumer uptake and use of mobile payments, particularly proximity payments.
The firm’s key predictions include:
- 2014 will not be the year that near-field communication (NFC) takes off – and neither will 2015. A growing number of alternative enabling technologies are readily available, and at lower cost to merchants and consumers.
- There is a chance that hosted card emulation (HCE) could help the case for NFC during 2014. HCE provides a cloud-based model for NFC that makes service provisioning much easier for issuers, developers, and other third parties. This has the potential to open the NFC market to more innovation and competition. However, this will happen only if the card schemes get behind HCE and security concerns are addressed.
- Bluetooth low energy (BLE) will come to the fore, bringing with it a proliferation in BLE beacon payment services and hyper-location retail applications. However, there is a danger that BLE beacon applications will be subject to hype that inflates what these types of application can deliver while obscuring their limitations.
- Location-based advertising will be a priority focus in 2014, but service providers underestimate the challenges involved. Location-based advertising is rightly seen as promising because of the tangible benefits it offers to both retailers and consumers, but it is complex and will become more so as location techniques and sources of data proliferate. At the same time, push-based location advertising has the potential to be very intrusive if not accurately targeted, and the need for precise targeting raises sensitive issues relating to data privacy.
- Although the mobile point-of-sale (mPOS) market is here to stay, consolidation in this increasingly crowded, commoditized area is inevitable and will begin in earnest during 2014. Going forward, mPOS providers will need to achieve scale; this means addressing larger enterprises, where they will have to compete with traditional POS vendors. This will be particularly difficult for smaller mPOS providers – the weaker ones will disappear, and the more promising will be acquired.
- There will be a sharp rise in tablet-based mobile commerce during 2014 and beyond. Consumer adoption of tablets is growing quickly, and their large screen size and enhanced graphics mean that they are better suited than smartphones to display visual merchandise.
- Over the last few years Apple has been putting in place the pieces that in 2014 will see it finally launch a full-fledged, unified mobile payments platform. This will have a positive impact on consumer uptake and use of m-payments, but may have a negative impact on other players hoping to gain market dominance in the space.
- Amazon's big ambitions for mobile, and its reported acquisition of GoPago’s mPOS technology, mean it will finish 2014 with a wider and deeper portfolio of m-payment services.
Eden Zoller, principal analyst with Ovum’s Consumer Practice, says: “A key trend for 2014 will be rationalization and consolidation in the digital wallets space. There has been an explosion in digital wallet launches over the last two years and this is not sustainable. Consumers will not adopt multiple digital wallets and over the next year or so will consolidate their loyalty and spending into one or possibly two digital wallet services. The best-positioned digital wallets will be those run by the financial and retail brands that consumers trust and are familiar with, putting players such as PayPal and Visa in a strong position. Wallets of this kind will be able to achieve scale and attract the advertising dollars that are needed to bolster the digital wallet business model.”