WHY MOBILE MATTERS .....AND SECURITY TOO..

We are well into what Mary Meeker calls the next major technology cycle, the mobile Internet. 
(Mary Meeker Internet Trends 2010)


The drivers are adoption of 3G, social networking, video, VoIP, and amazing mobile devices.   Global 3G penetration has hit the 20% sweet spot and is now mainstream.   Social networking platforms like Facebook already are winning a rising share of communications through mobile phones, while video on mobile is likely to follow its surge on the desktop and stimulate explosive growth of mobile data usage.  VoIP leader Skype already has more registered users than any global carrier, while the network effects from Apple’s iPhone / iTouch ecosystem have stimulated probably the fastest user growth in the history of consumer technology.  Only Exxon is now  worth more than Apple!!


So we have massive mobile growth accompanied by other technological developments such as NFC ( Near Field Communications) will become increasingly mainstream as POS systems incorporate such functionality.  NFC chips are being incorporated into mobile phones and Apple has ‘leaked’ the news that the iPhone 5 will have NFC built in.  Apple have payment information from over 160m users who have accessed iTunes or the App store.  This puts them way ahead of the curve.  They will probably want a chunk of the interchange fees generated from the $2.5 trillion spent on credit cards annually (merchants generally pay between 1 and 3% for the privilege. !)
  
So looking at mobile payments in more detail.   They are generally classified as either (1) digital goods payments – i.e. where the user is remote from the merchant and is buying music downloads or tickets; and (2) where the user is interacting at the Point of Sale (POS) to purchase physical goods -  and where transactions sizes are usually much larger than for digital goods. However there is no doubt that the user demand for convenient and intelligent ways in which to make payments for goods and services using a mobile phone is creating exciting opportunities for those organisations that are part of the mobile payment ecosystem. 
  
The usage pattern for these methods varies across the world;   for example there has been a strong increase in the number of mobile remittance services across the world, especially in the USA.  ( The global remittance market from over 200m migrant workers is more than $600bn per annum and growing !)   In developing countries which are underserved by the banking industry, the focus remains on mobile money transfer via SMS ( i.e. person to person).  In other regions the focus is on POS and mobile ticketing with the notable exception of the USA and Latin America where we see a strong focus on mobile remittance.   In some Asian countries there is a low internet penetration, a comparatively high mobile adoption and a push by the operators to offer mobile payments like mobile POS and mobile ticketing.   In Western Europe the situation is different again as the region is generally not under-banked and has a high internet penetration and so the uptake of mobile internet is relatively low, compared to Japan for example but as pointed out by Mary Meeker is starting to change rapidly.


However this is clearly not the full story.  What about mobile banking ?  What about money transfer ?  What about remittances?   The size of these markets and the aggregate transaction value is enormous.  Juniper predicts that the total number of users who will make digital goods purchases will exceed 2.5bn by 2014.  (Juniper : Mobile Payments for Digital & Physical Goods Players, Markets & Opportunities, 2010-2014)                                              CNN Money: The end of credit cards.


But what about security  ? 
We live our lives on our cell phones.   But we're not yet used to thinking about our wallet in terms of our phone.  When you head out of the front door nine times out of ten you will check that you have your phone with you before your wallet.   How times have changed.  
The increased adoption of mobile devices, and demands by employees to be allowed to use them in the workplace, will see increased threats not only to individuals but to their employers as well.  (MacAfee security labs threats for 2011).  The mobile device which is becoming smarter and more widespread now becomes a more attractive target to hackers.   At the same time applications on devices such as iPhones and Androids, at home or the workplace, are becoming increasingly popular and will also increasingly become targets. With historically weak coding and security practices, cybercriminals will try to manipulate a variety of physical devices through compromised or controlled apps, raising the effectiveness of botnets to a new level.


So we have a convergence of two phenomena.   Firstly the massive increase in the number of transactions on mobile devices and secondly the concomitant increase in the hacking attacks on those devices.  
  
What is needed to give users the peace of mind that not only their transactions but also their critical personal data on their mobile devices are safe?   The answer :  easy to use security and more specifically -  authentication.   The user as well as the counter-party in the transaction i.e. the merchant / the payee/ the payer will seek assurance that the other party is trustworthy and not a hacker/cyber-criminal etc. 


This is where authentication will be so vital.