The complexity and prohibitive cost of most new payment solutions have delayed massive deployments and generated negative perceptions among customers. As such, players in the payment ecosystem are resting their hopes on cloud-based solutions to create a bigger portfolio and reduce the costs associated with communication, hosting and access to the service or software.
New analysis from Frost & Sullivan,“How Cloud-Based Payment Could Impact the Payment Ecosystem?”, finds that the financial services industry will spend €86.9 billion on ICT by 2017 to alter its existing payment solution development strategy such that it incorporates innovation and meets end-user requirements.
“By aligning innovative payment technologies particularly those based on mobile usage and new mobility trends to industry requirements, the financial services industry can reduce total investments. While the initial investment to adapt IT services to industry needs is significant, the quick return on investment (ROI) and positive feedback more than makes up for this,” said Frost & Sullivan Information & Communication Technologies Global Programme Director Jean-Noël Georges. “Ultimately, this is a win-win approach, where the financial institution can minimise its spending on client account management while adopting a payment technology that facilitates mobile banking and associated services.”
However, the complexity involved in ensuring that payment solutions are interoperable, ultra secure, and certified has prevented product introductions. The development of technologies like mobile payment and mobile wallet has included entrants such as mobile network operators in the value chain, adding to the complexity of the payment ecosystem. Cloud-based payment solutions present an interesting option to overpass this market congestion.
With cloud-based payment solutions, and more specifically host card emulation solutions, the access to the secure element is not necessary as the mobile OS can directly communicate over the near field communication (NFC) interface in card emulation mode. Therefore, the time to market is minimized and total cost of implementation is optimised when a direct channel between service providers and consumers is created.
“Even though cloud-based payment solutions might be a threat to NFC in the short term, its deployment will boost the uptake of mobile payment solutions and consequently NFC in the long term,” stated Georges. “This is exactly what the industry requires as mobile payment penetration has been lower than market expectations, mainly due to a fragmented ecosystem and the availability of excess of payment solutions involving different stakeholders.”
For more information on this study, please email Edyta Grabowska, Corporate Communications, at edyta.grabowska[.]frost.com.
How Cloud-Based Payment Could Impact the Payment Ecosystem? is part of the Smart Cards (smartcards.frost.com) Growth Partnership Service program. Frost & Sullivan’s related studies include: 2014 Global Smart Card Forecaster, The Future of Mobile Authentication, Trusted Service Management, and Payment Privacy Protection - Global Security Implications. All studies included in subscriptions provide detailed market opportunities and industry trends evaluated following extensive interviews with market participants.
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