Mobile payments in the UK
Mobile payments have, in recent years, infiltrated the mainstream business propositions of some of
the well-known technology companies that design, develop, and sell consumer
electronics, computer software, and online services. Apple, Google and Samsung all provide mobile
payments services under the names of Apple Pay, Google Pay and Samsung Pay, commonly referred
to in the payments industry as the OEM Pays. These technology giants, have arguably played a
significant part in raising the collective consumer consciousness around NFC mobile payments in the
last couple of years. A number of questions remain about how far they will take their payments
proposition? What is their end game? Are they out to disrupt and compete directly with the banks?
For the moment, the answers are closely guarded and while speculation is rife, only time will tell
what the outcomes will be.
In the UK, banks are facing continuing uncertainty surrounding Brexit and how this will affect their
future business, resources are stretched as a result of competing priorities to meet regulatory
deadlines such as MiFID II, PSD2 and GDPR, and to cap it off, budgets are shrinking, and spending is
being more closely scrutinized. Considering these and other challenges, the majority of banks are
nevertheless showing signs of continuous and growing investment in technology, to address not only
regulatory issues, but also in recognition that their existing legacy systems are too inflexible and
limiting to address the needs of the bank of the future.
Challenger banks, increasingly present in the UK market, are gaining traction along with the monikerof “disrupter”. Some challenger banks, now offer services going beyond traditional current accounts
and are actively targeting specific segments such as SMEs and Corporates. Their clear advantage is
in their ability to develop their technology stacks by eschewing models of bespoke development in
favor of off the shelf solutions and strategic partnerships with FinTech companies. They are not
bound by the legacy constraints of the traditional banks.
One common feature of the tech giants, banks and challenger banks is their burgeoning interest in
The mobile payments landscape in the UK is dominated by the OEM Pays. It is not really surprising
that with all the pressures outlined above that banks, and, to a lesser degree, challenger banks have
adopted Apple, Google and Samsung as the lynchpin of their consumer mobile payments strategy.
By rolling out the OEM pays, they are, arguably taking the path of least resistance. There is, some
would argue, value in the relative ease of rolling out a mobile payments service backed by a trusted
name in technology.
For the end customer, NFC enabled mobile phones are the norm, as is the brand association. The
OEM Pay platforms on offer are ready and enabled straight out of the box. Add a funding source –
credit or debit card – and the service “just works”.
One very successful use case in the UK is around transport. TfL (Transport for London), in addition
to their Oyster Card program, has enabled all their terminals for contactless and NFC payments.
Commuters are increasingly using their phones to pay for public transport. In 2017, one in 10
journeys were made with mobile devices, equating to more than 31 million journeys.
With the proliferation of contactless POS terminals in retail locations and the fact that most POS
terminals will be NFC enabled in Europe by 2020, we can already see momentum building. Forrester
predicts that the European mobile payments market will vault to €148 billion by 2021. Mobile in-
person payments will grow the fastest, increasing almost fivefold between 2016 and 2021, from €4.6
billion in 2016 to €22.8 billion in 2021; they will account for nearly 16% of all mobile payments in the
Mobile payments are gaining traction and given the fast pace of change are likely to evolve in the
coming years. But are the banks missing a trick? Could they be leveraging mobile payments as a
conduit to promote their own bank apps and value-added services? Arguably, yes. In the current
environment, OEM Pays are co-existing alongside the bank apps. By choosing to pay through an
OEM Pay, customers are disintermediated from their bank as they can “fund” their mobile payment
purchases with any card issued by any institution. While the banks are paying out a small
percentage to Apple for the Apple Pay service, Google does not charge for the service but rather
collects payment transaction data. This was also showcased in the short clip attached from a BBC documentary entitled Billion Dollar Deals and How They Changed the World.
At a time when banks are competing to retain their customers, it seems counter-intuitive to be
giving away a valuable commodity which they possess. This is data that can be analyzed and used to
upsell customers relevant products such as, personal loans, mortgages and other revenue
generating products and services. It is the glue that can create sticky customer relationships and
retain their custom over the course of changing life events. By combining the mobile payment
functionality (be it as Issuer Pay and/or OEM Pay) into the single bank app, both parties benefit. The
bank, gains greater visibility on the habits and ensuing trends of their customers, together with the
added value of being able to target products and services tailored to their needs. For consumers, it
gives them a choice of payment options all the while using a single trusted app for all their payment
and banking needs.
At MeaWallet, we have built our platform to turn banks’ mobile payment aspirations into reality and
support the evolution of their mobile strategy. We would be pleased to discuss and share our
experience, insight and passion for the subject with you. Leave a message to have Regional Sales Director of the UK, Ness Diwan, get in touch.