Project Oscar only aims to address one side of the equation. The NFC acceptance ecosystem has not yet reached a critical mass whereby the consumer devices and the merchant acceptance devices are at a reasonable equilibrium and are available everywhere. Critical mass in both sides of the consumer and merchant sides of the equation is vital.
Is it a logical step forward for the industry?
It is a logical step forward but only a for the e-wallet consumer side of the equation. The mobile network operators wish to add value to the consumer proposition beyond the provision of voice and data services. Payment is one area where the consumer proposition can be enhanced. However, it does not directly address the infrastructure investment challenge that retailers will have in the acceptance of NFC mobile wallet payments. There are a number of mobile wallet initiatives announced or about to be announced by Google, Apple, Visa and MasterCard. A small consumer segment is only just starting to get used to using NFC contactless payment cards. The step from a NFC card to a NFC mobile wallet is a logical step but has yet to be proven on a mass consumer scale.
Will this project bring the mobile wallet to Europe?
At the end of the day it is the retailers who will accept mobile wallet payments. Without an acceptance ecosystem these mobile wallets will be useless to consumers. There are a number of strategic initiatives, new mobile payment schemes and joint ventures, amongst operators, banks and payment providers. These tend to be market specific rather than a regional or even European specific at this stage. Whether Project Oscar has the ability to be a mobile wallet for Europe remains to be seen.
Which regulatory challenges are there?
As demonstrated by other full harmonisation directives in Europe, there has been a poor track record in creating a consistent and standardised platform across a payments industry that is already fragmented. The immediate regulatory challenge will be whether any of these new schemes that aim to be collaborative are in fact anti-competitive or seen to be fixing prices for consumers and/or merchants. This is an area where the European regulators are well practiced in tackling.
Which issues do you foresee for this new mobile wallet?
There are three pieces of legislation that are likely to help facilitate the adoption of a new mobile wallet scheme. The Data Protection Directive - introduced in 1995 in response to the growing need for single market legislation to promote the safe collection and transmission of personal data between Member States - predates many of the mobile and internet developments in the handling of consumer data. The Directive on Privacy and Electronic Communications, implemented in 2002, is largely concerned with the protection of privacy and personal data within the electronic communications sector. The DPEC is most relevant and will be a critical consideration in any new mobile wallet initiative. The Consumer Rights Directive, introduced in 2011, is likely to improve the cross border potential of contracts negotiated between retailers and consumers. For consumers to sign up to any new scheme there must be a value or real benefit. Equally, for the retailer’s value proposition must be credible and provide commercial benefits and return of investment. It is these two aspects of launching and marketing any new payment scheme will be the true battleground. Building upon existing value propositions, brands and infrastructures will be key to a successful deployment.
|Your phone as a wallet|
Consumer susceptibility to new payment methods and the acceptance of consumer marketing and advertising in the UK is very different to what is seen in the US. It further becomes more complicated across different European markets. Any new mobile wallet must be able to adopt local cultural propensity to accept and use new technologies. Europe is not a single segment of 360 million harmonised consumers. There are considerable differences within any single state, across demographic and across the EU. Certain retailer’s in certain use cases, such as high frequency, low value payments, are slowly coming round to the advantages of NFC payments without a PIN. In store Wifi is more likely to be deployed by the larger retailers, where higher value transactions will be combined with product information, marketing communications and a deeper enriched engagement with consumers. Within the next three to five years, in-store Wifi is expected to show greater benefits for both consumers and retailers than accepting a NFC mobile wallet.
Which other sectors will follow Project Oscar with great interest?
Other than the retail sector, one sector that may prove to be an early adopter of NFC mobile wallets will be urban transit systems. In London, for example, Oyster is a closed loop NFC system that could adopt an open loop NFC mobile wallet model co-branded Visa or MasterCard. The transit operators around the world wish to reduce the cost of ticketing and cash handling. By placing the onus on third party payment providers the transit operators are able to accept open loop NFC mobile wallets (or NFC cards) at the barrier, thus initiating the payment at the start of the journey. This is likely to reach critical mass in an urban transit system where speed of the payment transaction is vital.
Many thanks for your time.
Michiel Willems © 2011-2012 CP Publishing Ltd. London, UK. Pictures: Risk and Regulation (top), siliconangle (above).