As payments made from mobile phones and other mobile devices increasingly become a popular preference over checks, cash and even debit cards, many banks around the world are rapidly re-evaluating and evolving their business models. New competition from non-traditional sources such as Apple, Google and PayPal is forcing banks to move quickly in order to preserve their payments revenues and take advantage of emerging mobile platforms, according to new report from KPMG International.
“Regarding mobile payments, I think that bank interests coincide with customer interests. On one hand, it is convenient for banking customers to use mobile devices, such as mobile phones, for basic banking operations. On the other, our analysis shows that processing mobile payments costs banks ten times less than transactions using a PIN pad, and fifty times less than using traditional channels such as bank branches.” said Alexander Sokolov, Partner, Head of Financial Services, KPMG in Russia and CIS. “In terms of the Russian market, I believe that many banks will adopt a "wait-and-see" approach, and will not start offering such a service until it is clear which mobile technology platforms are most effective for payments.”
Almost 85 percent of respondents to KPMG International’s survey of banking and financial services executives saying that mobile payments will have significant importance to their business within the next one to four years.
In the report, Monetizing Mobile: How Banks are Preserving their Place in the Payment Value Chain, respondents highlighted a number of significant and evolving challenges that are hampering the adoption of mobile payments. More than 70 percent of banking and FS executives cited security concerns as their biggest challenge, an issue that has only been accentuated by a spate of recent high-profile online security breaches.
The survey also revealed that that a lack of technology standards and infrastructure are also posing major barriers to the wide-spread roll-out of mobile payments.
The report also found that many banking executives were becoming acutely aware of the growing risk of competition in the mobile payment arena. Some cited the potential of mobile network operators (MNOs) working with device manufacturers to develop a system independent of the traditional payment infrastructure. Others, however, foretold of an even more serious threat in the form of new market entrants, such as specialist online payment players and online service provider giants.
Nevertheless, banks are still expected to play a strong role as the mobile payments value chain evolves, according to a large majority of respondents from the technology, telecommunications and retail sectors.
Regardless of the complexities and challenges that the industry faces, there is an overwhelming confidence that mass-consumer mobile payment systems are on the horizon. More than 80 percent of respondents to the KPMG International survey suggested that mobile payments is or would be mainstream within the next four years, with 36 percent those expecting mass adoption in the next two years.
Note to editors about the report
The report, Monetizing Mobile: How Banks are Preserving their Place in the Payment Value Chain is based on a survey of 145 retail and commercial banks, payment processors, acquirers, card services providers, retailers and payment technology vendors, as well as 20 in-depth interviews with executives and mobile channel leaders across 12 countries. The survey and interviews were conducted in the first calendar quarter of 2011.