Will MWC 2015 be full of wearables and wallets?
Traditionally, the next three weeks are rife with rumour and speculation as the industry gears up for the annual pilgrimage to Barcelona to worship at the altar of all that is mobile - the Mobile World Congress. This year is following the traditional pattern; only the subject matter has changed. Instead of interest around new phones and add-on apps, this year it's wearables and wallets that have caught the industry's imagination.
The Swatch Group made an announcement last week during an interview between CEO Nick Hayek and Bloomsberg concerning their move into the smart watch market. A bit of an about-face for the group; last year Hayek stated that Swatch would not be participating in a race to be first in developing the products because of consumer resistance. “You won’t see us participating in a race of who’s going to introduce what first,” Hayek said at the time. “There’s still big resistance from the consumer, so we’re going to wait.” Hayek has been skeptical about the smartwatch’s potential. Two years ago, he said that he didn’t think the smartwatch would be a “revolution” for the industry. He has repeatedly voiced concern that watch screens are too small for communicating and that such devices might need too much charging.
He also once said Swatch’s luxury brands such as Blancpain are smart watches because “they make you look smart.”
How quickly things change.
Now, in a remarkable change of strategy, the Swatch Group is planning to bring a smartwatch to market within the next three months, potentially as a stand against the debut of the Apple Watch in that same timeframe. The Swatch smartwatch will be NFC-enabled and won’t have to be charged, CEO Nick Hayek said in an interview. The Swatch smartwatch will also let consumers make mobile payments and work with Windows and Android software, he said.
Hayek is ready to go head-to-head with Apple, which has scheduled its smartwatch introduction for April. The market for smartwatches will probably reach about $US10 billion in 2018, Citigroup analysts forecasted last year, with half of the market coming from traditional watch wearers switching to the devices.
We will cover more MWC unveiled wearables as, and when, they happen. I don’t believe Swatch will be the only traditional watch company competing in this new market.
Talking of going head-to-head with Apple, there is also a heavy rumour that Samsung will be unveiling their wallet at MWC next month – the company has already announced it will release its next flagship Galaxy S6 during the show. Serious rumors from different sources indicate that the Korean electronics giant will also introduce its version of a global mobile payment system, which has already been given the moniker "Samsung Pay." The company needs to be fairly bold to pull this off - especially doing it so closely behind the Apple Pay release and the ensuing increase in number of Apple phones sold. While the revenue that Apple is collecting from fees associated with Apple Pay is still small, the “cool factor” of the technology has helped the Cupertino company to position the iPhone 6 as the best selling smartphone ever released. I would argue that Apple Pay has played a significant role in the success of the new iPhone.
Two years ago, during the Mobile World Congress, Samsung and Visa Europe announced an agreement to develop a NFC payment system that could be incorporated into Samsung’s upcoming Galaxy smartphones. A similar agreement was also reached between Samsung and Mastercard three months later, in May 2013. It was expected that Samsung was going to introduce such a system last year with the Galaxy S5. But the complicated mobile payments market, the resistance of the carriers, the complexity of the provision of the payment systems, plus security concerns, have stopped Samsung and other OEMs from introducing an independent, easy to use, NFC tap-and-pay service.
NXP could certainly help Samsung out here. The introduction of NXP’s PN66T, a module combining a highly secure Smart MX2 element (P61), NFC, operating system and trust provisioning, can change all that. The PN66T is Europay, MasterCard, and Visa (EMVCo) certified, and also supports American Express ExpressPay, thus fully covering the three big credit card companies, ensuring the compatibility and interoperability with existing and future payment solutions.
It has been rumored that Samsung will incorporate the PN66T into the Galaxy S6 and the biggest opportunity for Samsung now could be the European market. Europe is not yet serviced by Apple Pay, but has the highest number of contactless cards and payment terminals in the world. Because EMV has been in use for more than 10 years in Europe the infrastructure is ready for NFC mobile payments. As of last September, there were 1.5m contactless terminals across Europe, six times more than in the US, and a fifth of all credit cards in circulation were contactless.
Samsung will have to resist the strong pressure from MNO's to control the payments ecosystem. For several years they have been trying to launch mobile payment systems together with financial institutions, using their SIM cards as security modules. In the past, pressure from the MNO'S have forced several Android manufacturers to drop or disable NFC secure modules on their phones, so the MNO's could deploy NFC services such as payments or transit, on their SIM cards. This is great for them but very limiting for consumers and providers. Some observers have argued that for Samsung to be successful with their “Samsung Pay” they will need a system that users can trust, that banks are eager to sign onto, and that sidelines MNOs from the process (just like Apple did). Otherwise it will be another “pilot” without real customer acceptance. The first target markets for Samsung could indeed be Europe and Asia - perhaps to head off Apple Pay before it reaches these shores. The take-up may be faster than in the US as the market there struggles to come to terms not just with mobile payments but EMV payment in general. For all the noise generated by Apple Pay, the rewards could be far greater elsewhere in the world.
Concerning mobile and digital payments, MasterCard CEO Ajay Banga speaking to analysts during MasterCard’s Q4 results, said NFC was still a ‘slow burn’ despite the buzz around Apple Pay. “You saw Apply Pay talk about their mobile payment growth, and at the end of the day, yes, they’ve done a great job and it’s excited the market, but it’s still a very small percentage of what the total number of transactions are,” he said. A few weeks ago CEO Tim Cook said Apple Pay accounts for more than $2 out of $3 spent on contactless payments across the three leading credit cards in the US. But, as Banga points out, this is still a relatively small figure. So it would appear that there is still everything to play for.
Google certainly think so. The search company has launched a new payment service in the United Kingdom. Those using Gmail will be able to send money to their friends and family via email using this service. The service was launched in the United States last year and has enjoyed modest success, utilizing the Google Wallet infrastructure. Google Wallet is the company’s mobile payments service, which has managed to gain some momentum among consumers that are interested in mobile commerce. Google users will need a Wallet account in order to transfer money over email. Those receiving funds in this way will not have to have to Gmail account, but they will need to create a Google Wallet account before they can access these funds. Google Wallet must be linked with a bank account in order to work and functions in a way that is similar to traditional payment cards. The service is available only to Gmail users that are 18 years old or older.
The new service is currently only available for the desktop version of Gmail. Google Wallet, however, is available for mobile devices and can be used to send and receive money. Google’s new service may provide it a stronger foothold in the UK mobile commerce space, especially as Apple prepares to launch its own mobile payments platform in the country in the near future.
Could there be a wave of wallets and digital commerce from the US/Asia that is about to arrive in Europe? It would be exciting to think so. I expect product and solutions unveiled at this year’s MWC to have more immediate impact in Europe than in previous years.
About time, too.
Until next week.
Steve Atkins
Contactless Intelligence
