PwC: Catching up with the mobile payments revolution

Technology innovators are challenging the traditional banking model. Banks need to act fast to keep clients.


A fundamental shift has started to take place in financial services companies through the increased use of smartphones and other mobile devices for mobile payments – this shift is expected to radically change the way retailers and consumers view payments and will involve consumers increasingly using mobile devices for banking, online shopping and making purchases at the checkout.

“Traditional players, such as banks, have an early lead in the market because of their long-standing customer relationships and a higher degree of confidence in the security, however other financial services firms, technology innovators and retailers are now beginning to challenge this traditional model and take advantage of consumer preferences,” says Ciarán Kelly, financial services partner with PwC.

He cites new services such as Apple TV and the Hailo taxi smartphone app as examples of this changed paradigm. “You can rent a film, download it and pay for it on Apple TV without having to leave your house or touch your wallet,” he says.

“With the Hailo app you can book your taxi, identify your driver [in advance] and pay for it all online on a smartphone without using cash or opening your wallet – all adding convenience and enhanced value to the consumer.

“You can also go into many shops and make purchases worth less than €15 using the near field radio technology. Soon, the same technology will be available to make larger payments by using a passcode, in a similar way to credit card purchases. Services like these are driving mobile payment adoption.

“The customer today has a far higher expectation of convenience and speed when it comes to making payments, particularly small ones,” Kelly points out. “And they expect the banks to be part of that value chain, however banks have been cautious entrants into this space, leaving the door open for new innovators within the technology and retailer space.”

Threats to banking

“Customers are using alternative payment providers and this is becoming one of the biggest threats to banking in terms of the potential loss of access to customers and market share.

“While banks currently have tangible advantages, the battle is theirs to lose. It is imperative that banks adapt to the changing environment, remain open to collaboration and be receptive to new technologies.”

Collaborations could offer a way for the banks to fast-track their mobile offerings, he says. “The local banks here in Ireland do have some really good mobile banking offerings but they need to go further than that.

“If you think about the banks’ cost models, investment in mobile makes extremely good sense. Mobile has huge benefits when you compare it to the fixed internet and can deliver additional revenues through mobile ads, mobile coupons and virtual currencies.”

But the change required is more than simply about investment or technology, it’s cultural. “Banks need to be thinking about how they can make their customers’ lives easier and more convenient. They need to move into this area. There is a good example of how they can do this in a leading Dutch bank where the bank is working with its business customers in cities to offer apps to their customers which allow them to pre-order purchases with them. There is a case where a bank is helping its customers make their customers’ lives easier and more convenient. And there is a wealth of other opportunities out there that the banks need to be tapping into.”

Battle for market

So who will win in this emerging space? “Traditional retail banking players clearly have the early lead in this space. However, if they do not keep up with the fast pace of change, not to mention investment capital, technology innovators and collaborators will prevail.”

So should traditional banks invest heavily in this area? “Banks should not ask whether or not they should invest in this area – given the rapidly changing mobile payments environment, their increasing risk of obsolescence and the growing mismatch between banks and mobile technology innovators, the answer is clearly Yes. The questions that banks need to ask is, how they should position themselves in this area?”

So, will our mobile wallet soon replace the traditional leather wallet? “Perhaps and eventually, yes. Just visualise your physical wallet. Your credit and debit cards, your driver’s license, health insurance card and loyalty cards. Surely all of these cards can be digitised and stored on a mobile device, however trust and security remain an issue.”


To what degree does security or trust continue to be a concern for consumers in this area? “Our own research indicates that mobile payments security is the area of greatest concern among consumers. As mobile payments become more popular, all players within this space, including banks, will need to continue to strengthen their defences against online fraud perpetrators. All operators within the mobile payments arena should anticipate a higher level of regulatory scrutiny in this space in the years to come, particularly in relation to data protection.”

He concludes by pointing to the scale of the opportunity which awaits banks that embrace the mobile payments revolution. “There are two billion bank accounts in the world but there are six billion mobile devices and with mobile payments increasingly being seen as a realistic alternative to cash you can see the size of both the threat and the opportunity. The banks that provide a differentiated digital experience, with advice and relationship management elements tailored to the individual customer, will secure more profitable relationships with their customers.”