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Summary

A dream come true for some and a baffling instance of mass hysteria to others, the success of mobile game Pokémon Go has taken the world by surprise. In less than two weeks, the app has quickly surpassed some of the giants of the mobile space in terms of daily users and downloads, including the likes of Tinder and Twitter, and will be studied carefully by many mobile payment providers. The long-term popularity of this latest incarnation of Pokémon is debatable, but it does highlight the enormous potential of augmented reality-based experiences. For payment providers and merchants, this suggests the potential to introduce completely new ways to create new consumer experiences, which in turn will require underlying data and payments infrastructure to support this.

Where Pokémon goes, others will follow

Although a seemingly frivolous way for children, let alone adults, to spend their free time, the enormous global success of the Pokémon Go mobile app is unprecedented and will go down as a milestone in the history of mobile applications. Based on Nintendo's long-running series of games, films, and TV shows, Pokémon Go has in just two weeks grown to become the most downloaded mobile game of all time across both iOS and Android in the US. It commands a higher number of daily active users than Candy Crush Saga did at its peak and, more crucially, currently commands an average user time of 33 minutes per day, compared to Facebook's 22, according to tracking site appinstitute.com.

While Pokémon Go seemingly falls into the category of another fad videogame, much like Candy Crush Saga and Angry Birds before it, the game is different for its use of geolocation and augmented reality features. With so many users being driven to real-world locations by the app, it is unsurprising that developer Niantic is now indicating that the app will tie in with real-world commercial retail locations, with McDonald's rumored to be among the first to sign up. The game will be used as a means to drive foot traffic into merchant locations and subsequently drive transactions. With such a huge level of initial success, even if Pokémon Go's popularity burns bright but short, it is inevitable that other developers and merchants will rapidly launch their own augmented reality, location-based apps.

This ability to drive consumers in-store and help drive transactions is a key component of many mobile wallet strategies, and it is not a leap to imagine a Pokémon Go-type experience with payments functionality built into it. Enabling this is not an overly complex task due to the emergence of new payment technologies, most notably tokenization, but will nonetheless require significant processing power and data management skills. For vendors and payment providers, this opens up the possibility to create wholly new ways to pay, and creates major opportunities for those capable of enabling this.

Furthermore, even if payment providers and merchants cannot tell a Pikachu from a Snorlax, Pokémon Go does highlight the fact that the mobile space often evolves in unexpected if not weird ways. While much of the mobile payments space has been focused on purely functional development, platforms with deeper engagement and an element of fun continue to see significant success. Few banks would have guessed at the success P2P platform Venmo has found through the use of stickers and social media capabilities. Likewise, in Asia-Pacific, social messaging platforms such as WeChat are now emerging as major mobile payment channels in their own right. Adding this fun factor to mobile payments will undoubtedly prove successful longer term, and augmented reality gaming could be a key driver of this.

Appendix

Further reading

"Pokémon Go is a reminder that online gaming infrastructure is hard to get right," ME0002-000683 (July 2016)

2016 Trends to Watch: Payments, IT0059-000037 (December 2015)

Tokenization in the Payments Value Chain, IT0059-000027 (September 2015)

Author

Gilles Ubaghs, Senior Analyst, Financial Services Technology

gilles.ubaghs@ovum.com

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