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Mobile payments to grow 60.8% by 2015: Capgemini

Mobile payments to grow 60.8% by 2015: Capgemini

Traditional banks’ market share in non-cash payments is projected to decline to half of the forecast 800 billion transactions by 2024

Worldwide mobile payments are projected to grow by 60.8 per cent to 47 billion transactions through to 2015, up from 29.2 billion in 2013, according to Capgemini’s World Payments Report 2014.

The report ranked Australia fourth in the world for the number of non-cash transactions over the last 12 months. Finland took first place, with the United States coming in second and Netherlands coming third.

Phil Gomm, from Capgemini Australia, said Australia could shortly surpass the Netherlands for the third position globally, with a growth rate in 2011-2012 of 8 per cent.

“We can confidently forecast that Australia will keep pace, or exceed the forecast 2013 growth rate in non-cash transactions of more than 12 per cent for the mature Asia Pac marketplace,” he told CIO Australia.

“M-payments will increasingly form a substantial component of this growth, where we expect to keep pace with the extraordinary global growth projection of more than 60 per cent sustained through to 2015.”

Non-banks are expected to grow at a faster pace in m-payments than banks, the report found, using the example of PayPal processing more than $27 billion in mobile payments in 2013, around 15 per cent of its total payment volumes.

Payments made with ‘virtual currencies’ or crypto-currencies via mobile phones are also rapidly growing. The report found there were an average of 35,000 bitcoin transactions per day in 2013, now growing to 60,000 transactions per day.

The report stated that through regulatory approaches similar to Brazil's, which has normalised ‘electronic currencies’, allowing it to regulate bitcoins and any future currency, virtual currencies will continue to grow.

In Australia, however, the Tax Office does not consider bitcoins as money as defined in the GST Act, and does not allow for the foreign currency conversion exemption, where no GST applies to the conversion of foreign currency through an exchange.

Banks still have the lion’s share of m-payments globally – 25.4 billion transactions in 2014, compared to 3.8 transactions by non-banks.

However, when it comes to non-cash payments, banks’ market share is projected to decline to half of the forecast 800 billion transactions by 2024.

“Some banks may also change their business models, moving away from selling financial products to activities that enable commerce, such as selling data, while other may move further, or solely, into the B2B space,” read the report.

Read: IBISWorld says banks’ greatest competitors may not be other banks in the future

The growth of mobile payments and instantaneous transactions is also driving the need to set up a real-time payment platform for the underlying infrastructure, the report stated.

“In the retail and corporate worlds, customers increasingly expect real-time capabilities, which are tightly linked to core processing systems.

“As CSMs [clearing and settlement mechanisms] evolve, there is also greater scope for real-time payments processing. Disruptive technologies such as mobile and customer demand for data visibility with improved analytics capabilities are also key forces.”

The Reserve Bank of Australia (RBA) is working with industry to develop a New Payments Platform (NPP) that will clear and settle payments in real time at the bank infrastructure level. By the end of 2016, any transaction will occur within a few seconds using the new platform, and will support overlay services such as mobile payments created by commercial banks.

Read more: Commonwealth Bank survey predicts triumph of mobile wallets

Moving away from a bilateral-type infrastructure, the platform will allow banks to connect to a central hub rather than having separate connections to each individual participant.

The challenge at the moment for many banks across the world is that they usually have different payment processing systems for different products.

“Banks usually operate different systems for processing domestic and cross-border payments, direct debit and credit transfer payments, as well as card and other payments,” read the report.

“Many of our clients are only part way through the transformation program of high and low value payment processing systems. We forecast increasing convergence of high and low value payment systems, thus extracting further value form those organisations that have invested in the payment hub approach, and can move away from the deep silo solutions of the past,” Gomm added.

Read more: 50% of app testing in the cloud by 2017

Lack of clarity around mobile payment statistics

The report noted that due to a lack of clarity in reporting standards for m-payments, its market share may not be entirely accurate and that industry analysts may over- or under-estimate transaction volumes.

“There has not been any concrete action to date from regulatory agencies to improve the collection of statistics on all payments from these market players, despite the fact that volumes are growing rapidly in this segment,” read the report. “It also affects the future payments strategies of corporates.”

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Tags real-time paymentsvirtual currenciesmobile paymentscrypto-currenciesCapgemini

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