Mobile is everything.

I hope that every single person would agree on above statement. Every single thing personal computer is capable of doing from several years is almost possible on mobile devices these days. Mobile payments are willing to make their mark too. The new tech generation is all about mobiles and gadgets.

I have been doing research on mobile payments for quite a while and wish to share some analysis in this exciting space.

Below is the scenario of a day in the life of Mr. Chuck Norris. From morning to night, most of the payment transactions initiated from mobile.

You can check the mobile payment segmentation done below based on the category of payments i.e. remote and local (proximity) payments. You can clearly see which payments fall in what category.

Let’s dive into the top five categories of mobile payments:

  1. Mobile at Point of Sale: Mobile Wallet
  2. Mobile as Point of Sale: —Use mobile device to process credit card payments
  3. Direct Mobile Billing: Put it on my phone bill
  4. Closed loop mobile payments: Pay via mobile devices only at a specific vendor and only against an established account balance
  5. Mobile Payment Platform: —This is the “everything else” mobile payment. Think of it as a “catch-all” category for products that let consumers send money to merchants, or even each other (called as P2P), all while using mobile devices. It might be at the POS, it might be online, it might use text messages or even NFC (Near-Field Communications) someday

Mobile payments are one of the hottest topics of the last year. There’s been a tremendous investment that is going on in this area. Let us check out some of the trends and technologies which are essential for any mobile payment system:

  • —Security and Biometrics
  1. —[Tech Giant]Pay
  2. —Relying on NFC, Tokenization, SE, EMV, HCE, Fingerprint Reader, Biometrics and other different technologies to provide seamless and secure options for users
  • —Offer better deal and experience
  1. Redesign the bridge for retailers to offer their products to customers and how consumers pay for their retail purchases
  2. —Consider a scenario wherein instead of walking into a coffee shop to buy a cup of coffee, users will receive an offer for a better deal, such as 12 cups of coffee or the price of 10, which they can purchase in advance and redeem whenever they like
  • —Make payments easier
  1. —Transfer the money directly to your friends account with the help of an app
  2. —Pay to a merchant in a quickest possible way. For example: Using Touch ID (biometrics), one-touch payment services etc.
  3. —Example: When you’re out with a group of friends and struggling to split the bill. These apps streamline that by enabling one person to pay for a credit card and everyone else to pitch in via an app

The common mobile payment technologies used by different companies are:

  •  NFC – To make an NFC payment one needs to bring the NFC device close to POS terminal where NFC capable device recognizes the POS device. It uses a token using the POS provided data and a secure element and expected to be default mode of payment currently
  • —QR codes – —Most of the smartphones have cameras with the ability to scan and read QR codes. This method is extensively used in mobile payments. There are basically 2 types of QR code payments that can be made:
  1. —Receive a QR code on your phone and get it scanned at the counter: In this case, the customer needs to have a payment app installed in the mobile phone, which will generate a QR code for the payment transaction. This QR code can be scanned using a barcode reader by a cashier to process the payment
  2. —Scan the QR code at the counter and make the payment: In this case, the customer needs to have a payment app installed in the mobile phone, which can read the QR code and process payment for the same
  •  —MST (Magnetic Secure Transmission) – —This method generates changing magnetic fields over a short period of time that emulates the same magnetic field change as when a card is swiped across the read head that emulates the same magnetic field change as when a card is swiped across the read head. This technology is owned by LoopPay which is taken over by Samsung. Samsung Galaxy S6 supports MST
  • —STK (SIM Application Toolkit) 
  1. —Securely store the IMSI which identifies the subscriber uniquely
  2. —Wrapper on top of the SIM technology, this enables the mobile service provider to provide the user with a menu based technology that is used for various services including mobile payments
  3. Examples: —M-Pesa by Safaricom
  • —Mobile Card Reader – —Can be attached to any smartphone enabling the smartphones to make payments through cards

As you have seen, there are many technologies and applications already present in the market but still there are very less number of people who actually make use of these. The consumer traction ratio is way below expected. This is mainly due to less awareness and security. Let us look out some of the key factors required for success in mobile payments.

User convenience:

  •  —Enormous Freedom to pay for goods and services via mobiles devices for consumers
  • —It is important to provide a similar user experience for the validation of the mobile transaction
  • —Improve acceptance of payment transactions that are free of slowdowns, delays and re-entry of the same data into different platforms for the same purchase

Perception of security and trust

  • —Allow organizations to take full advantage of the business opportunities while at the same time giving end users confidence in the security of the service
  • —End users must trust the payment service provider behind the solution

—Payment Processor – —To make a mobile payment app successful, it should be noted that the payment processor should be chosen appropriately. This would make sure proper PCI compliance handling ensuring security to every transaction via mobile device

—Lookers to Bookers – —A process that improves the conversion of interested consumers into paying customers

—Range of Payment methods:

—Support a range of alternate payment methods and digital wallets (former, current and future), including Android Pay, Apple Pay, Samsung Pay, Master Pass, Visa Checkout, Amex Express Checkout, M-Pesa, prepaid cards and others

—Make it easy to buy from you, and passengers will turn to you first for whatever they need.

Development Oriented Trends

     

—Braintree SDK provides an easy to use the collection of APIs for adding native payments to iOS/Android mobile apps. The Venmo touch network provided by Braintree technology allows a user to make a one-tap purchase without having to input the credit card information over and over again.

—Stripe APIs are developer-friendly and robust. Sensitive card data security is accomplished by converting the information on the card to tokens on their Stripe servers. One can charge these tokens later in your server-side code.

PayPal API and Square Connect API are also extensively used.

Market Opportunity

Let’s take a look at different opportunities in mobile payments market –

  • —Gartner predicts mobile payments will grow at a rate of 30% per year from 2013 through 2018 – to reach more than $900 billion in 2018
  • —1.09 billion people will be making mobile proximity payments globally by 2019, of which 939.10 million will be made through NFC
  • —A Focus on providing merchants with Multichannel Payment Services
  • —Exciting market ahead for P2P service providers e.g. PayPal’s Venmo and services from Facebook, Google etc.
  • —Payment through wallets using NFC, tokenization, biometrics because mobile devices will be a mainstream option for person-to-person or person-to-business payments
  • —Cryptocurrencies. E.g. Bitcoin, Litecoin but still in the early phases
  • —One touch mobile payments e.g. PayPal/BrainTree provides One touch service to more than 10 million consumers today
  • —Support for loyalty cards and strong security
  • —Using Touch ID for Apple Pay transactions

Let us look at some of the popular applications which are used for mobile payments.

  1.   Apple Pay
  2.   Google Wallet
  3.   Android Pay
  4.   PayPal
  5.   Venmo
  6.   Facebook Messenger
  7.   LoopPay / SamsungPay
  8.   BlockChain
  9.   PayFroit
  10.   Merchant Customer Exchange
  11.   Square Cash

Applications in different sectors:

—Healthcare – —The mobile payments industry is expected to reach $142 billion by 2019, and healthcare providers are beginning to position themselves to embrace the mobile space. Health care providers may benefit from the advent of mobile commerce as it will make them more accommodating to consumers and give them access to a growing mobile consumer-base

—Finance – —Google partnered with Citi Group to develop the Google Wallet NFC-based mobile payment system —PayPal, which is now a de-facto member of the financial institution club, has announced the development of proprietary NFC-based P2P system built on a Nexus S Android device. —In the UK, O2 has partnered with Barclay’s Bank to launch the O2 Money initiative.

—Telecom – —Many telecommunications companies are showing an increasing interest in developing mobile solutions for financial services. —The fourth major player in the US cellular network arena, Sprint, has launched its proprietary Sprint Mobile Wallet service in partnership with Cardinal Commerce payment processors.

Companies are looking to invest more and more in mobile payments and finding out innovative approaches not only for the consumer but also for the business users to make payments. To give you an example, Google has come up with an exciting innovative approach to making payments. It is named as “Hands-Free Payments” method. After installing the Hands-Free app for Android or iOS, you’ll add a photo of yourself for identification and either add a credit/debit card or choose one that’s attached to your Google account. Once that’s all done and you’ve rendezvoused with a cashier, mention you’re paying with Google — the app uses Bluetooth LE and WiFi (among other things) to tell whether you’re in a store equipped for Hands-Free payments and passes your information along to the cashier’s point-of-sale system. The cashier confirms you are who you say you are using that photo and your initials, and that’s that. Payment complete.

This is fascinating. Though this sounds quick, there are a lot of complexities involved in this and Google is claiming to take care of them.

Yeah, this is a vast domain and many things are still yet to be researched. As I get my hands dirty with them, I will write an article in continuation with this one.

Hoping for the better mobile payment year this time!

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