Mobile payments to focus on innovation, disruption and consolidation, says Ovum

Analyst's 2014 Trends to Watch report predicts continued innovation, particularly in location-based apps

Sean Dudley
Sean Dudley
By Sean Dudley on 15 January 2014
Mobile payments to focus on innovation, disruption and consolidation, says Ovum

Ovum has released its predictions for the mobile payments industry for 2014, with a focus on innovation, disruption, and consolidation.

According to the analyst’s 2014 Trends to Watch report, 2014 will see continued technology and service innovation, particularly around location-based applications in the mobile payments space.

The report identifies outstanding issues in most mature markets, linked to low consumer uptake and the use of m-payment and digital wallet services.

Ovum predicts that consumers will lean towards financial brand-affiliated services. This is backed up by the results of the analyst’s Consumer Insights Survey, with 43% of respondents choosing banks as their most trusted m-payments service provider, followed by credit card companies with 13%, online payment providers with 9% and 6% selecting mobile operators.

“Overall revenue growth for mobile payments in 2014 will be slow and steady rather than spectacular, at least in mature markets,” said Eden Zoller, principal analyst with Ovum’s Consumer Practice. “The different dynamics at work in emerging markets will make for stronger growth among unbanked users. We expect to see much consolidation in the digital wallets space in 2014. There has been an explosion in digital wallet launches over the last two years and this is not sustainable going forward. Consumers will not adopt multiple digital wallets and instead will focus their loyalty and spending with one or possibly two services. The best positioned will be those associated with the financial brands that consumers trust most and are familiar with. It is digital wallets of this kind that have the best chance of achieving scale, and also attracting the advertising dollars that are needed to bolster the business model.”

Key predictions from Ovum for 2014 include an indication that the analyst does not believe near-field communication (NFC) payments will take off in either 2014 or 2015, due to existing alternative technologies being available at a lower cost to merchants and consumers.

However, Ovum has also suggested that there is a chance of hosted card emulation (HCE) helping NFC over the coming year. HCE provides a cloud-based model for NFC, which simplifies service provisioning for issuers, developers, and other third parties. Ovum believes this has the potential to open the NFC market to more innovation and competition.

According to Ovum, consolidation in the mobile point of sale (mPOS) market is increasingly crowded and commoditised, and will only proliferate in 2014. The report suggests that mPOS providers will need to achieve scale and address larger enterprises where they will need to compete with traditional point of sale vendors, which could prove difficult for smaller mPOS providers.

The report also predicts the eminence of Bluetooth low energy (BLE), which will expand the use of BLE beacon payment services and hyper-location retails applications.

And finally, the 2014 Trends to Watch report indicates the potential for a sharp rise in tablet-based mobile commerce in both 2014 and beyond. With consumer tablet adoption growing quickly, and provide a different visual element to displaying of goods. Ovum’s IAB survey of US brands indicated that more advertising spend on tablets is likely in 2014, with 75% of respondents indicating that they expect to see their use of tablets increase during 2014 and 2015.

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