Market Insight

Vodafone Spain launches mobile payments service

December 02, 2013

James Allison James Allison Principal Analyst, Consumer Devices

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• Vodafone has launched its NFC-enabled mobile payments service in Spain.

• The Vodafone SmartPass application was developed in partnership with Visa.

• The service is set to be extended to Germany, Italy, the Netherlands and the UK.

Vodafone Spain has launched its near field communication (NFC)-based mobile payments service, Vodafone Wallet. The service allows Vodafone's customers to pay for goods and services with NFC-capable Android handsets from Samsung, Sony, and HTC. Users who do not own a compatible handset (e.g. iPhone users) can still opt to use the service with a SmartPass tag that they can attach to their device.

 The Vodafone Wallet app can hold information on Visa cards, travel cards, loyalty cards, gift cards, and vouchers. The service is built upon the GlobalPlatform standard allowing for large-scale interoperability.

Vodafone SmartPass, a prepaid account app developed in partnership with Visa, is the first mobile application that can be used in conjunction with Vodafone Wallet. It enables users to pay for goods and services in any Visa payWave contactless terminal around the world. According to Visa, there are more than 1.2m payWave contactless terminals in Europe.

Vodafone aims to extend the service to Germany in mid-December, with launches set for the Netherlands, UK and Italy in Spring 2014.

 

Momentum in mobile payments services in Europe had stalled over the last twelve months. European operators have chosen to invest more in LTE than new value-added services while they stave off a declining subscriber base in those markets affected by the economic downturn. Vodafone Spain's subscriptions have declined by 20% since Q1 2012 and messaging ARPUs have fallen by 59% in the last three years, a slide precipitated by the emergence of popular over-the-top (OTT) services like WhatsApp.

Uptake of existing mobile payments services has also been lacklustre. Operators may come to view mobile payments as a missed opportunity to embed themselves deeper into consumers' day-to-day lives and reap the benefits of decreased churn and increased revenue from mobile payment transactions. Unfortunately operator-led mobile payments solutions have been let down by a cumbersome process with several layers of security which offers neither a more secure nor a more convenient experience to that of widely available plastic cards. Low penetration of NFC-enabled point of sales (POS) terminals also means that consumers still need to carry their cards and wallets with them to pay at most stores. But the main usability problem faced by the service is that it is essentially a stored-value account. In other words, users need to top-up their accounts via the app (or online, in the case of users of the adhesive NFC tag). This process adds an additional level of friction to the experience, and is only suitable for certain minority use-cases, such as parentally-controlled allowances for minors.

A differentiating factor of the Vodafone Wallet app, and possibly its main advantage, is the ability to store membership and store cards, as retailers generally have QR and barcode-compatible equipment. This could increase visibility of the app, provided that Vodafone succeeds at establishing the necessary retailer partnerships. This is also unlikely, however, as retailers are eager to develop their own-branded mobile loyalty apps and tightly controlled schemes, and will be wary of brand and visibility dilution in a multi-retailer-oriented app.

 

Geography
Spain Western Europe
Organization
Visa Europe Vodafone
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