The United Nations recently reported that there are now 6 billion mobile phone subscribers in the world.  6 billion; nearly one for every man, woman and child on the planet.  Of these, one billion are smartphones, devices which have captured our imagination and are increasingly our gateway to our digital lifestyles.

As with most prominent technologies, smartphones have evolved significantly to provide a vast array of communications, entertainment, information and productivity facilities.  The next wave of innovation is predicted to be the ability to make payments – I say predicted, on some networks and handsets, this facility has already arrived.

The predictions do however, point to a significant increase in the deployment and uptake of mobile payment services, across a number of competing technologies and business models.  By the end of 2012, Gartner is predicting that over $175bn of payments will have been initiated by mobile devices3 and by 2017 Juniper predicts this figure to rise to $730bn.  At the forefront of this growth is Near Field Communication or NFC-based mobile payments, but can also include app based peer-to-peer payment services such as Barclays' PingIt and M-Pesa in Africa, and QR-based services such as the Starbucks' in-house payment application.

Clearly, as the use of physical cash declines and card use matures, the natural alternative channel will be the smartphone – this transition is almost inevitable and the opportunities for different players to capture and shape the market are there for the taking.  However the mobile payments space in 2012 presents a potent combination of new and potentially damaging risks.

From a macro perspective, the mobile payments sector is unique as it involves the close collaboration of previously unconnected industries. Retailers, mobile operators, handset and SIM card manufacturers, banks and card payment networks will be required to work together to create a complex ecosystem which contains vastly different objectives, requirements, cultures and experience.  In setting up a mobile payments service, each player has a number of strategic options to pursue.  Do they go it alone or work on a niche offering with one or two other organisations? 

Do they participate in a broader offering such as the US mobile operator joint venture ISIS or the UK's version, Weve?  How will value be derived from the business model, particularly on the assumption that consumers are not willing to pay more for goods and services simply through choosing to pay with their mobile?  Once a decision is made, what is the regulatory impact of this decision?  These are key questions that clients from across these sectors should be asking themselves at the outset.

From a technology point of view, the risks in establishing a mobile payments ecosystem are immense.  New data sets will need to be owned, governed and securely stored, in line with all relevant information privacy and protection requirements.  Front and back-end technology will need to be completely secure, something which has unfortunately recently impacted Google's Wallet offering.

The ability to detect and mitigate fraud should also feature prominently in all considerations.  Lastly, as with any large scale implementation, deploying technology to enable mobile payment services presents significant risk, particularly in the context of the different ecosystem players and the complexities of managing different supplier and customer stakeholders.

From a business perspective, there are of course obvious risks in terms of integrating mobile payments services and processes into existing operations, such as finance, procurement and HR.  New mobile payments offerings will need to be governed appropriately, with the right policies and procedures underpinning a risk management and governance framework which will ensure minimal disruption during transition into BAU.

An effective risk management strategy, across the entire risk landscape and managed at each stage of the evolutionary process, should reap significant rewards for any organisation intending to operate in the mobile payments space, ensuring that businesses go to market in a controlled, risk-aware and secure fashion.  The opportunities presented by mobile payments and enabling technologies, to engage and inspire the 6 billion global subscriber base are limitless.  How will these be balanced with risk?

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