Europe meets the US on mobile payment

Monday, December 10th, 2012, Paris Region Economic Development Agency (PREDA) organized a meeting between leaders in the US  payment space, BayPay Forum members, and European stakeholders Ingenico, Natural Security, PayPlug and Lobary, who shared mobile payment trends at Atelier BNP Paribas in San Francisco.

I had the pleasure of providing the keynote, summarizing current mobile payment trends in Europe and  the challenges of digital proximity experiences in the mobile customer journey. I also had the opportunity to meet one-on-one meetings with VCs, strategy consulting companies and Silicon Valley vendors interested in the European mobile payment market.

Comparison of US and European mobile payments trends:

  1. No inhibition to use remote payment solutions for proximity transactions.
    On the issuing side, the agreement between PayPal and the Discover network is an example of what would be impossible to do in the European regulatory framework. Same for Square, a mobile acquisition solution – mPOS – allowing cash payments by credit card, for a low investment and a fixed commission rate (2.7%). In the United States, the convergence between remote and proximity (card present) payment is ongoing. Uncertainty persists about the security of transactions and fraud, however the focus is on providing simple, practical and universal mobile usages. Europe payment networks remains protected by a strict regulation of EMV Co (card present), but for how long… Until security crashes prove that Europe’s solution is superior ?
  2. A take-off of web-2-shop prepaid solutions.
    Gift cards, vouchers, coupons… Ads follow one another with Groupon, Square, Apple PassBook… Moreover, Discover just announced  an agreement with Apple to allow the use of Passbook wallet in local shops. These solutions are based on the use of QR Code, displayed on smartphone’s screen, and readable by the barcode reader or the webcam of the merchant. On this subject, the France is well positioned: MayClub (by ProWeb CE) allows the issue and use vouchers safely on existing POS systems (a turn-key solution proposed by 4G Secure). Flashiz announces 100,000 merchants who include a QR code for flashing on their receipt and thus safe payment. Of      course, Auchan has disrupted the market by announcing Flash’N Pay, a wallet open to all payment solution providers, focused on customer marketing and payment in proximity.
  3. Opposite trends for secured NFC mobile payments.
    It is obvious that US players are not yet convinced that NFC mobile payments are a viable solution. The development of Google Wallet is difficult, and countered by the announcement of MCX, a NFC wallet solution supported by several trade brands. Same for Isis, carried by several mobile operators, which faces technical difficulties during initial market launch. Finally, banks are not massively issuing contactless cards, nor are merchants enabling contactless payment mode at POS. Although most US and European Smartphones Europe are becoming NFC, the absence of this technology on iPhone 5 has frozen the hype. However, it sounds like US consumers are convinced of the value of NFC gestures for « service discovery », check-in » and « switchgear » on peer-2-peer – but on NFC payment in-shop, they do not appear to be ready.
    The situation in Europe is quite different. Banks issue contactless cards at large scale and large retailers activate their POS for contactless transactions. Mobile operators are ready too, with common and open standards, and compatible SIM cards. Secure mobile payment EMV, standardized by the AEPM (Association Européenne Payez Mobile) is now validated by MasterCard, Visa and the Groupement des Cartes Bancaires. It allows operating the EMV infrastructure deployed in Europe without a fundamental change of « card present » architecture (offline/online). It is an important asset which should play in favour of NFC payment in Europe, assuming it  would seduce customers.

Beyond those differences, US attendees and European visitors agree that, beyond mobile payment, it is digital proximity that represents the real revolution, the act of payment as a commodity which should be integrated into an overall seamless customer experience in multichannel.

  • Remote payment solutions based on identification/authentication in a cloud computing environment, and in-shop (card present) payment solutions at EMV standards, should coexist – even converge? Let’s not forget that fixed and transactional costs will influence the success and rely upon the effective security of payment systems proposed.
  • The attractiveness of consumer offerings will be a critical deployment vector: simplicity and convenience of proposed solutions, obvious benefits – economic or freemium services – standardization of the customer’s experience featuring private or universal Wallets, and a natural use in confidence.
  • Innovation merchants and brands offering marketing solutions and payment, web-2-shop-in-shop in shop-2-web, and person to person (including social networks) will contribute to the roll-out massive occasions for uses.
  • Finally, the development and the monetization of data targeted for promotional purposes or loyalty programs are on the loop… as CRM and economic models. On this topic, our US friends are more liberal than European data privacy laws. It will be judged on results…

Very interesting… And by the way, what is your intended position to leverage the digital proximity ecosystem for your customers in 2013?

François Lecomte-Vagniez
Associate partner, Lobary
This email address is being protected from spambots. You need JavaScript enabled to view it. @Lobary

Special thanks: I would like to thank PREDA for organizing this trip. The objective was to attract innovative US companies to the Ile-de-France region to create skilled jobs; promote France’s attractiveness for R&D investment, and support promising startups. Also, thanks to Daniel Chatelain, a Frenchman in the US, who has succeeded via the BayPay Forum in mobilizing over 2,300 companies interested in topics related to payment, and 5,000 global decision makers. Finally, I want to thank Frédéric Tardy, President and CEO of The Atelier BNP Paribas USA for his warm welcome, and remarkable analysis on many topics of innovation, widely shared in the ecosystem.