New research by Juniper, analysing the mobile wallet market, indicates Europe lagging behind almost every other region in its transaction value forecast despite high levels of tech adoption and smartphone penetration. So, what’s going wrong?
Europe is expected to book lower mobile wallet transaction values than Asia, Africa and the Middle East, North America and the Indian Subcontinent in the next five years.
Services have been launched by big brand names in most markets – with handset manufacturers, telecoms operators, banks and retailers all having a crack, yet it would seem none have taken off in the way developers intended.
Part of the issue may be in the lack of differentiation. With contactless cards already popular in many European markets, consumers need to see a tangible benefit from using their phone compared to their bank card – either through integration with retail loyalty cards or through an incentive linked to other services being offered by the same vendor.
Problems on the cards
Windsor Holden, head of Forecasting and Consultancy at Juniper Research, believes the lack of additional features is one of the central flaws in many of the services trying to get a foothold in European markets.
“In the US they [mobile wallet companies] are seeding the market, the lack of contactless, or even chip and PIN, means their first experience of fast payment technology is using a phone,” Holden said. “In the European market, you have a very different case.”
“People are already using contactless and it’s only in the last 12-18 months you’ve had real movement in the handset space. It’s overwhelming how popular contactless cards have become so it’s going to be a real struggle.”
“Is there enough of a differentiator in services right now to make people pay with a handset rather than a card? At the moment I’d say no.”
There is certainly evidence loyalty can make a difference. Earlier this week, Ovum released a cross-market study showing 91% of mobile wallet users aged between 16 years and 24 years ranked the ability to manage different loyalty cards in their mobile wallets as either “important” or “very important”.
Enrique Velasco-Castillo, senior analyst at Analysys Mason, believes the issue may lie with the sheer number of competing providers in the market and changing consumer attitudes to app-based services.
“The mobile wallet market in Europe is fragmented,” Velasco-Castillo said. “Mobile operators compete against banks, device manufacturers and start-ups. For this reason, service differentiation is challenging. There are also signs that users in mature European markets may be experiencing ‘app fatigue’, where most apps downloaded are rarely – if ever—used again.”
He believes the largest opportunity for the likes of Apple Pay and Android Pay in Europe is by enabling payment for physical goods from third party apps or browsers due to the “deep integration with the device’s operating system” putting them at “an advantage in providing a better user experience.”
While the strategies of each player will differ on a country by country basis, with economies still heavier on cash usage offering more of a first mover opportunity, some markets already appear to be attempting to close the door to the big wallet providers.
The European Central Bank promised to look into standardisation across the Eurozone for mobile payments this year, while some countries have seen financial institutions come together to try and secure their place at the centre of the ecosystem.
Earlier this year a move from the major banks of Norway to come together and offer a consolidated service seems a certain attempt to grab their market and we may see similar strides upcoming across other markets.