Mobile payment services have expanded significantly during 2016 as smartphone makers intensify their efforts to build their own payment ecosystems. At the same time, innovations and diversification in mobile payment methods have generated new demand and opportunities worldwide. According to market research firm TrendForce, the scale of the global mobile payment market will reach US$780 billion by the end of 2017, amounting to an annual increase of 25.8%.
“Among the smartphone makers that are also developing their mobile payment businesses this year, Apple and Samsung are two brands that have an advantage over their competitors,” said Kelly Hsieh, senior research manager of TrendForce. “Since Android has over 50% of the mobile OS market share worldwide, Google also has an opportunity to build up an extensive mobile payment ecosystem. Google has recently accelerated the international expansion of its digital wallet platform Android Pay and made a big step forward this December by announcing partnership with major Japanese e-commerce and Internet company Rakuten.
According to Hsieh, Japan’s mobile payment has been dominated by domestic service providers and is somewhat closed off to foreign competition compared with the U.S. and China. Therefore, having Rakuten to support Android Pay’s entry into the country is strategically important for Google. Users of Android Pay can now access Rakuten’s e-money platform Edy, which is accepted in major restaurant and retail chains operating in Japan such as McDonald’s, Family Mart, Lawson and Domino’s Pizza.
Google furthermore is working with Sony to incorporate FeliCa – an RFID smart payment solution developed by Sony – into an NFC-enabled IC card that works with smartphones. Next year, Google will further strengthen the ecosystem of Android Pay in Japan by linking it up with more payment services and financial institutions, including eMoney, Visa, MasterCard, and Bank of Tokyo-Mitsubishi UFJ.
Verification solutions for mobile payment will become more diverse in 2017
Next year will also see significant progress being made on the development of security solutions for mobile payment. Hsieh noted that in addition to the ongoing integration of different hardware technologies in encrypted chip design, advances in encryption algorithms and multi-factor authentication methods will increase efficiency in user verification, payment confirmation and secure data transfer.
Also, NFC chips are becoming the mainstream solution in mobile payment. Chinese smartphone brands such as Huawei, Xiaomi and Meizu have launched NFC-enabled smartphones this year, thus spurring wider adoption of the technology. TrendForce estimates that over 60% of smartphones shipped worldwide in 2017 will feature NFC. The security and convenience that this technology brings may radical change consumers’ payment habits in the future.
According Hsieh, access control is the central issue in the mission to create a more secure NFC module. “On the software end, building NFC modules will need take account of payment app designs,” said Hsieh. “On the hardware end, NFC controller chip will eventually incorporate various types of security-related IC components. For instance, NFC modules can add in sensor chips for fingerprint, iris and fingerprint vein recognition. Having different biometric technologies work together can provide multi-factor authentication for an NFC-based mobile payment system.”
Currently, fingerprint recognition is the prevalent biometric technology used in mobile payment because it helps simplify the transaction process while providing a higher level of security. TrendForce forecasts that over 50% of smartphones shipped worldwide in 2017 will feature fingerprint recognition. The technology will become part of the standard offerings among mobile devices because of its ability to enhance user experience.
Another biometric technology that major smartphone makers are investing in is iris recognition. Compared with fingerprints and voiceprints, iris patterns are a much more secure type of biometric data. Samsung, for instance, continues to work on deploying iris recognition to its mobile devices. To optimize the user experience with this technology, Samsung has developed algorithm that speeds up the iris scanning and user verification process. While iris recognition has advantages in security and convenience, it requires an extra infrared camera. Therefore, iris recognition is expected to be available for high-end smartphones in the initial period because of the additional hardware cost.