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Banks are hurriedly developing mobile-banking platforms to keep pace with rising demand among consumers and clients to transact business via their smartphones, but some pure technology firms are stealing a march on them in mobile payments.
At the Euro Banking Association conference in Helsinki this week, the banking sector’s embrace of mobile-payment technology was one of the key issues discussed, amid fears banks are missing the boat, given the phenomenal growth of mobile usage during the past decade.
At the conference, Andrew Tarver, founder of Boldrocket – a London-based initiative set up by business and technology consultants Capco to explore the use of technology and data in business – said banks have come late to mobile technology and as a result are playing catch up to technology firms that have focused on developing digital-payment platforms.
One example is TransferWise, a peer-to-peer money-transfer payment system that billionaire Richard Branson and co-founder of PayPal, Peter Thiel, invested $25 million in this month. TransferWise has processed more than £1 billion-worth of payments since 2011 and claims to have saved its customers around £45 million. The platform strips out bank charges in transferring money abroad.
The company is Branson’s second investment in a financial services start-up in as many months. In May, the Virgin founder took part in a $30 million funding round for US-based BitPay, which enables online businesses to process payments in virtual currencies, such as Bitcoin.
Banks such as Barclays have developed innovative mobile applications, but its Pingit, for example – which enables consumers to transfer money between their accounts using only their mobile phones – was only launched in 2012.
However, Vanessa Manning, head of payments and cash management, EMEA, global transaction services at Royal Bank of Scotland, says banks are responding to rising customer and corporate client demand.
“The rapid growth of mobile-payments … is fuelled by innovation and consumer demand,” she says. “B2B payments in developed markets and C2B [consumer-to-business] in emerging markets are the main segments behind this growth.”
She adds that innovation is more evident in the C2B space, where the customer expects anytime (immediate payments 24/7), anywhere (mobile-enabled) and any payment instrument type.
“These expectations will have widespread impact on traditional and e-commerce value chains and offer unparalleled access to emerging markets and those outside the traditional banking system,” says Manning.
Wolf Kunisch, co-head of global business line financial processing and head of the German and CEE business units at Worldline, an electronic payments company, questions whether mobile payments will replace credit- and debit-card payments entirely, or whether both will be used alongside each other.
He says it has become easier than ever for companies of all sizes to accept cards as there is no longer any need to purchase an often expensive terminal. All that is needed is a dongle, which can be connected to a smartphone. In some ways, the technology is starting to work together, he says.
Kunisch adds there are some concerns involving the adoption of new technology, especially among companies around high-value transactions.
“Innovation is good, but in the end it comes down to challenges of scale and fraud,” says Kunisch. “Developments have to be sustainable, both managing scale and being secure. New systems need to combine security and convenience.”