26 August 2014
Why the UK does not lead in mobile innovation
There is no reason why mobile payments should stick to borders. Think of it, consumers in the US have access to the same online products and services, mobile devices and mobile payment providers as people in China or Brazil do.
Still, it seems to take time for differences between countries to vanish. For example, the pace in which mobile payments are embraced is not the same in the UK as in Poland or Turkey.
On the contrary, both Poland and Turkey seem to be a lot more innovative and eager to develop and use new payments technologies compared to the British. It may be surprising, but according to Financer blogger Chris Skinner both countries are ‘hotbeds for retail bank innovation’.
Skinner’s blog posts discussed two seemingly opposing research studies on mobile payments in the UK. According to the Mobile Payments Index conducted by payments processor Adyen, the UK leads the word in mobile payments. A staggering rate of 39 per cent of UK online transactions come via mobile – the highest rate in the world.
On the other hand, security specialist Intercede found that more than half of all Brits would never use mobile banking services. The main barriers to use mobile banking are login and authentication options; 87 per cent of respondents mentioned identity theft as their biggest concern.
Although the findings seem to contradict, this is not necessarily the case. It is possible that half of the Brits are mCommerce enthusiasts, and the other half is skeptical.
One of the reasons, according to Skinner’s analysis, why the UK cannot compete with the level of innovation in Poland and Turkey, is the structure of its banking industry. In the UK ‘little changes fast and the big five banks can all keep up with innovations … Turkish, Polish and Spanish banks have far more challenges to outwit each other than big banks in big markets that are well established.’
Other reasons why Turkey and Poland are high on the innovation ladder:
- Most of their IT infrastructure has been built in the 1990s, which means that banks don’t have the ‘cemented foundations of old IBM mainframes that reduces their ability to adapt’
- Also, resources to reinvent systems are much cheaper in Poland and Turkey than they are in London
- The biggest driver for innovation, according to Skinner, is that both countries have a young and dynamic population. Turkey’s median age is 29, while it is 40 in the UK. Also, 25 per cent of the Turkish population is under 14 years old.
No matter which of the reasons mentioned above is the most important one, Skinner’s analysis does make it clear that the UK’s leading position as a financial region does not automatically mean that it leads in payment innovation. Western Europe should keep a close eye on emerging, young economies when it comes to the future of mobile payments.