By David Poole
myPINpad
Payment solutions are emerging at a rapid pace around the world, and many enable payments from mobile devices. But this rate of growth presents challenges in terms of customer awareness of security ‒ challenges that need to be addressed before customers fully embrace mobile payments.
The Capgemini 2015 World Payments Report refers to adoption of mobile payments and initiatives such as EMV (Europay, MasterCard and Visa) in the United States as key drivers of noncash payments growth globally. Yet many consumers remain confused about what is available.
For example, although mobile payments awareness in North America has reached a tipping point with the majority of consumers aware that they can make payments through their mobile devices, fewer than one in five use their phones to make at least one payment a week.
That was a primary finding of Accenture's 2015 North America Consumer Digital Payments Survey, which revealed that, while the number of North American consumers who knew they could use their phones as a payment device rose to 52 percent in 2015, mobile payments volumes grew by just 1 percent.
In terms of emerging trends, the survey found continued consumer interest in connected commerce (wearable or connected payment devices) and peer-to-peer payments. One in five respondents had used a wearable device to make a payment at least once, and a similar proportion reported being interested in making a payment through a connected smart device.
Awareness of mobile payments is not only strong on this side of the Atlantic – it also appears to be translating into activity. According to Barclays, U.K. consumers will spend more than £53 billion a year through their smartphones and tablets by 2024, more than five times the current level of payments made via mobile devices.
Yet there is still a case to be made for the view that lack of knowledge is restraining adoption, particularly in relation to security. Many more consumers would be using their mobile devices to make payments if they had a better understanding of processes such as multifactor authentication via the cardholder PIN.
According to a report by the advisory service Tractica, the worldwide mobile biometrics market will reach $3.5 billion by 2024, growing from a base of $249 million in 2015. Interestingly, the firm's principal analyst observed that finance is one of the two sectors that will drive the highest amount of growth in the mobile biometrics market, alongside government services, and specifically referred to the use of biometric authentication in addition to a PIN for high-value or sensitive transactions.
There also seems to be lack of awareness among consumers regarding their rights and obligations when they are making mobile payments. The Organisation for Economic Co-operation and Development noted that consumers have difficulties in determining their rights, which depend both on the payment mechanism (for example, payment charged on a mobile phone bill or a credit, debit or prepaid card payment system) and the device being used.
Other concerns are that payment terms and conditions are sometimes too complex and that there are inconsistencies in payment-related information. However, our research indicates that customers are ready to embrace change around authentication.
We found that UK consumers had a high degree of confidence in PIN as a method of authentication, with 85 percent of respondents saying they would like to be notified on their mobile of high-value transactions and have the ability to instantly authorise with a PIN. An even higher percentage (90 percent) of frequent online shoppers said that if it were available, they would use PIN to authorize payment via mobile.
Banks' ability to invest in innovation is in many cases inhibited by the need to maintain legacy systems and by the overhead of regulatory compliance. But PIN has been used at ATMs for more than 30 years, and consumers are familiar with entering a four-digit code to access their bank accounts. Having taken the PIN from ATM to the store, consumers are now ready to take their PIN into the digital age.
Consumers want to know more about payments and take control of their finances ‒ financial education leads to financial literacy and capability and, in turn, to financial wellbeing. The Centre for Economics and Business Research estimated that consumers' lack of financial know-how costs the UK billions of pounds a year, and it is clear that informed consumers are better equipped to enjoy the financial freedom different payments systems offer.
Overall, consumers are becoming more concerned about fraud and banking institutions, so payments experts will have to step up their educational efforts to maintain consumer confidence. A 2015 LexisNexis report found that more than one-fifth (21 percent) of all fraudulent transactions were attributed to the mobile channel, despite only 14 percent of transactions being accepted via mobile. While frequent online shoppers want more in terms of security, the real story is all about how this should be achieved.
New technologies need to reach critical mass before consumers come on board. There is also a regulatory imperative. The revised EU Payments Directive requires that all payment service providers adopt "strong customer authentication."
This means an authentication based on the use of two or more elements categorized as knowledge (something only the user knows), possession (something only the user possesses) and inherence (something the user is) that are independent, in that the breach of one does not compromise the reliability of the others and is designed in such a way as to protect the confidentiality of the authentication data.
The drivers of the mobile payment revolution, from finance to retail to systems providers, need to educate consumers on mobile payment's benefits and easy use. Awareness among younger consumers is the essential precursor to mass market adoption. Yet solutions like PIN offer a bridge to other generations who are already familiar with this, proposing an evolution instead of a revolution.
Read more on what the impact the adoption of PIN as a form of authentication would imply for merchants, consumers and banks on myPINpad's latest report: http://mypinpad.com/archives/4764. 
David Poole, Business Development Director at myPINpad (www.mypinpad.com), has spent more than 20 years at the forefront of new technology and payment processes. Before joining myPINpad in 2013, David was an executive at Miura, a technology company founded to reshape electronic payments. He oversaw the commercial success of the company during the three years he held this position. He can be reached at davidp@mypinpad.com.
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