Can App and Dongle systems alleviate Mobile wallet Fears

Visualize this, if you will: No more fumbling for credit cards or digging through your pockets for spare change. The technology already exists to let you buy that through your phone, simply by saying your name out loud at the register. Cool isnt it?  Forrester says payments made via mobile devices in the United States are expected to total $90 billion by 2017, a huge leap from the $12.8 billion spent in 2012.

German-headquartered Payleven, one of several European firms looking for market share, offers an app and dongle-based system for turning smartphones into card readers and has been fully authorised by the UK’s Financial Services Authority, as a payment institution. Payleven is a device that attaches to your smartphone or tablet with iOS or Android which allows credit card processing. Paypal is offering a similar device due to launch in the summer. 

The stamp of approval should go a long way to reasure the mobile userbase about secutity concerns, as the FSA road to authorisation is no easy feat to achieve. It would seem however that new mobile adopters are still uneasy about the tech according to a recent study. The start-up is the first of its kind to secure approval from the UK’s chief financial watchdog, enabling it to contract directly with its customers. The arrangement effectively covers the firm – which currently operates in Italy, Poland and the Netherlands, as well as Germany and the UK – across Europe.

The study of over 1,400 consumers, from market research firm Chadwick Martin Bailey, finds that while one-half of smartphone owners are familiar with mobile wallets; many who are familiar, have reservations about adopting. Would you feel more secure about using your phone as a payment device with the chip and pin element introduced? The research also reveals that beyond allaying security concerns, mobile wallet providers must do more to articulate the advantages of the technology over more traditional forms of payment.

Additional insights include:

  • Mobile wallet providers who guarantee fraud and theft protection are well positioned to drive adoption among mainstream consumers
  • Concerns over security remain a significant barrier to adoption, but the promise of 100% fraud protection substantially increases willingness to adopt. Notably, these security-conscious smartphone users are the most likely to identify banks and credit card companies as their preferred mobile wallet provider.

Payleven’s Co-founder and CMO Konstantin Wolff emphasized the importance of the alliance with Visa Europe and the security of the Chip & PIN solution in a statement:

We are excited to launch the perfect solution for the European market. Since Visa requires PIN authorization at the mobile point of sale in Europe, we are now in the position to allow our merchants to accept the leading card brand in the world – Visa. With Chip & PIN we can offer our merchants the highest security standard in card payments whilst being fully mobile, more flexible and convenient than traditional card terminals.

Neither  Payleven’s Chip & PIN reader nor the payleven application stores any sensitive data. All sensitive data is encrypted and stored in a safe and compliant environment. Therefore a lost Chip & PIN device is not a security risk to the merchant or the customer.

Customers find the benefits of location-based services appealing, but privacy and battery life remain concerns—Respondents indicate location-based services that facilitate information gathering, like showrooming, drive adoption, but too many alerts and offers are unappealing. Providers willing to allow users to customize the number and type of offers they receive may have an advantage. 

While banks and credit card companies are the clear choice for the security conscious, opportunities exist for other providers— hence my citing the Payleven example. Convenience, features, and usability are compelling attributes for many current and prospective mobile wallet users; while banks win on security, the feature-conscious prefer tech giants—with Amazon and Google topping the list as their preferred mobile wallet provider. For those who value convenience, credit card companies hold the advantage.

“These findings reveal that consumers are still in the early stages of understanding the uses and benefits of mobile wallets—there remain many elements(players, features, positioning, etc.) that will evolve over the next 12 to 18 months,” says Jim Garrity, SVP of Chadwick Martin Bailey’s Financial Services practice. “With security concerns a key hurdle to adoption, banks are well-positioned as trusted providers of secure financial services, but this window of opportunity won’t remain open for very long. Consumers already have the technology at their fingertips; and as familiarity increases, other entrants are proving that they are secure, reliable, and offer clear advantages that drive adoption.”

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