Real Reasons Paypal, Others Now Think Africa

Without mincing words, mobile payments are facing large obstacles in Europe as confirmed by a new Financial Insights Report.

This could have spurred Paypal and other mobile payment platform recent romance with Africa.

A new report from IDC Financial Insights provides an overview of key technologies related to mobile payments and discusses implications for consumer experience based on real-life examples across Europe.

The report found that although Europeans are increasingly using mobile devices for this purpose, most payments for physical goods are still made using the traditional ecommerce environment, via the Internet browser.

Juniper had in April 2014 reported that global payments via mobile devices expected to be US $507 billion in 2014, up 40 percent from 2013.

The growth is expected to be driven by purchases of physical goods via mobile devices.

Mercator Advisory Group in July 2014, also gave reasons why serious investors cannot call Africa a bluff again, stating that, “When companies are looking at regions for overseas investment, Africa generally comes in last in terms of overall attractiveness. On the surface, it is easy to understand the payments industry’s reluctance to invest heavily in Africa.

“But Africa is a continent filled with potential for e-payments and within the next three to five years, the global payments industry will increasingly look to Africa as a major source of future sustained e-payment growth.

Africa faces similar challenges to those of other world regions that have many developing economies, like improving financial inclusion and developing a wide network of e-payment acceptance.

“However, many markets across Africa have already made strides to overcome these hurdles and are enjoying robust growth. How rapidly the remaining markets are able to accomplish similar goals will determine whether the continent becomes a hub of e-payment growth and innovation internationally in the near and intermediate future”.

More so, IDC said that the future of mobile payments belongs to apps, which interact with smartphone hardware components to enable superior user experience.

With mobile payments potentially adding value to a number of vertical markets, several groups of players — including financial institutions, wallet providers, retailers, and mobile network operators — are trying to take advantage of in-app payments.

The report found that, consumers (in Europe) do not have a strong desire to pay with mobile phones and not all will be motivated by rewards and convenience.

They want to play games on their smartphones, access social networks, read news, and check emails, but consumers are perfectly happy to use cash and cards for payments.

Given the investment going into contactless infrastructure across Europe, banks will gradually start offering host card emulation (HCE) based mobile payments through their own mobile banking applications.

Retailers wishing to offer mobile payments as part of their own apps have no choice but to experiment with non-NFC technologies.

SEPA tools and new domestic interbank arrangements will enable and spread mobile payments funded by bank accounts across Europe.

"This is a critical time for the mobile payments industry — the technological landscape in this space is finally well-defined for all relevant parties to enter this space. Before placing bets on one particular technology or approach to mobile payments, it is essential to understand its limitations and potential," said Andrei Charniauski, research manager, IDC Financial Insights.