The 2012 Mobile Payments Market in Europe (Overview)
January, 2012
A115 Emergent Technologies Research Divison
Internet and mobile payments are quickly becoming the new standard when it comes to paying for goods and services. The transition has been helped along, in part, by the recent spike in the number of people who own a smart phone and a move towards e-commerce. Making an online payment no longer requires a computer, just an Internet connection. These methods are more convenient for consumers and an easier way for merchants to receive their payments faster than with conventional payment methods.
Security concerns and the initial expense for a merchant to set up an e-commerce system has been somewhat of a deterrent, reflected in the fact that internet and mobile payments still make up a small amount of overall retail payment transactions. Just over 3 percent of all European retail sales are made through the Internet. While mobile payments account for approximately 100 billion (EUR) worldwide, this only represents a fraction of all retail trade. Part of the reason for the relatively low use of Internet and mobile payments is the fragmentation of the market and the fact that these payment methods are still relatively new. Many merchants are still not set up to process payments with either method.
More than 700 million credit and debit card payments were made in the EU in 2009. That number is estimated to be closer to 800 million today. Credit cards are used more than 100 billion times a year around the world, averaging about 1.5 cards per person. The average amount spent with each card is about 2,000 (EUR) per year. The number of online shoppers in Europe is expected to reach upwards of 190 million through 2014, with buyers expected to spent an average of 500 to 600 (EUR) per year. In 2009, one out of every three European citizens made banking transactions online. That number is expected to rise to two out of three by 2020.
According to Visa Europe, spending on debit cards rose 27 percent in the UK alone last year. A good portion of this spending came from mobile transactions. During the recent Christmas shopping season, Visa Europe reported 1,200 transactions per second. Mobile payments could experience an additional boost due to the expansion of so-called contactless payments among retailers and transport providers. Visa Europe issued 20 million contactless cards in the UK in 2011, with the company anticipating demand to increase over the next few years. The mobile payment market should increase as more businesses embrace the emerging technology.
The popularity of m-payments is already increasing throughout Japan and South Korea. European merchants are beginning to see the advantage of m-payments as an additional source of revenue in a sluggish global economy. Part of the effort to increase the acceptance of m-payments is enabling merchants with the technology to receive this method of payment from customers. Industry-wide efforts are underway to develop standards as the technology spreads throughout the EU. According to a 3Q 2011 forecast report released by Research and Markets, mobile payments in Eastern Europe will increase to more than EUR 33 billion by 2015.
Mobile payments are likely to increase as more EU citizens purchase smart phones. Currently, nearly one in three EU citizens owns a smart phone. According to some studies, mobile payments could reach 250 billion (EUR) by 2014. Mobile payments involve more than just bill paying. Mobile payments apply to a wide range of purchasing situations, including buying groceries, paying for restaurant bills, buying digital goods, paying for parking and public transport tickets and peer-to-peer payments. MasterCard Europe recently initiated studies to determine what is necessary to increase the use m-payments in the European market.
The Eastern Europe Mobile Payment Market Forecast provides data based on research in specific mobile markets throughout Europe, including Hungary, Poland, Czech Republic, Ukraine and Russia. The statistics are being used to develop comprehensive regulations and a unified effort to spread the acceptance and use of m-payments among businesses and consumers. The consulting firm IE Market Research Corporation provides the most comprehensive research covering m-payment transactions on a country-by-country basis. IE tracks what specific transactions are involved in m-payments. According to their Global Consumer Telecommunications Survey, some of the most common transactions include:
- Merchandise purchases
- Bill payments
- Mobile money transfers
- Purchase of digital products
- Transportation payments and ticketing
Compared to other countries around the world, Europe has long lagged behind the emerging m-payment market. Now, it appears the infrastructure needed to spread the m-payment trend throughout Europe. Lately, there seems to be a sense of urgency among European markets to become major players in the global trend towards various forms of e-commerce. While major global markets have struggled over the last few years, Europe has experienced growth in the m-payments area over the past year. Many vendors have launched trial runs of mobile payment options to work out any issues before deciding to incorporate paperless transactions on a permanent basis. Vendors, transit authorities, banks and mobile operators have all participated in recent trial testing of m-payment systems, including experimentation with Near Field Communication technology.
As the infrastructure falls into place for m-payment systems in Europe, numerous challenges remain in the steps towards widespread deployment of mobile payment structures. Some of these challenges include a lack of standards and interoperability. Security remains a concern among customers who would make mobile payment transactions. These concerns have slowed down the widespread acceptance and adoption of m-payments across the major European markets. The biggest issue appears to be determining standard regulations. Before consumers widely accept the new technology, the payments industry itself must overcome the current obstacles. The public will remain reluctant to adopt m-payments until safety issues are addressed.
Visa Europe and MasterCard Europe are taking steps to convince consumers to embrace m-payments, including a commitment to encourage merchants and banks to install the necessary software to handle mobile transactions. However, recent data breaches have dealt a serious blow to consumer confidence in some markets. This highlights some of the concerns slowing down the widespread acceptance of m-payments through Europe. Additional issues include:
- Establishing standards for all EU nations
- Making the necessary technology available
- Lack of confidence over security issues
- Lack of a solid infrastructure in all major European markets
- Increasing the number of banks and merchants willing and able to accept m-payments
As global markets continue to embrace mobile payments, it is only a matter of time before this method of electronic commerce becomes the new standard in Europe. Most economic experts believe that once the infrastructure is solidly in place throughout Europe, the use of m-payment transactions will dramatically increase and put Europe on par with the rest of the global community.
