What the heck is Mobile Payment?

Google-WalletMobile Wallet, Mobile Payments, Digital Wallets! Everyone’s talking about these technologies disrupting the payment industry… what are these?

We all know that mobile banking has taken off as most of the banks offer it on multiple platforms. Mobile Payments, however, has not taken off yet due to variety of reasons — Consumers are not asking for it because they don’t see any additional value compared to their physical wallets. Additionally, customers are still learning this new tech, mobile payment companies still have several hurdles to overcome like security, infrastructure, etc.

Big technology companies are betting that consumers will eventually use mobile payment solutions and are spending enormous amounts of money to get consumers to replace their physical wallets with their versions.

Before we deep-dive, let’s align on terminology:

A digital wallet refers to an electronic device that allows an individual to make electronic commerce transactions. This can include purchasing items on-line with a computer or using a smartphone to purchase something at a store. An individual’s bank account can also be linked to the digital wallet. They might also have their driver’s license, health card, loyalty card(s) and other ID documents stored on the phone. The credentials can be passed to a merchant’s terminal wirelessly via near field communication (NFC). Credit: Wikipedia

Mobile Wallet is synonymous with digital wallet.

Mobile payment is transfer of money using mobile phone”.  Basically, instead of paying with cash, debit/credit cards, a consumer can use a mobile phone to pay for a wide range of services and products.

There are over a billion smartphones already in the market and phones are integral part of everyone life. Perhaps it’s just a matter of time before we embrace the idea of not carrying wallet and instead use mobile phone to run our lives – pay rent, buy train tickets, pay for parking, buy flight tickets, car, lunch, drinks, make reservation at restaurant, whatever.

Mobile Payment Systems

There are multiple ways to initiate mobile payment, a few common ones listed below –

  1. Near Field Communication (NFC): Also, called contactless payments. Customers initiate payments at merchants point of sale terminal using their mobile. Big tech companies – Apple Pay, Google Wallet, and many retailers like Walmart, Macy’s, target adn few others use this technology.

For those of you techies out there, you might be wondering – Hmm, Bluetooth does this, why NFC? You are right, Bluetooth does but NFC uses significantly less power which is very imp considering mobile battery life. Bluetooth have to be paired which is a nightmare. Contactless payments using NFC technology are based on open standards.

2. Mobile Internet Payments: these are routed over internet. Paypal dominates this market.

3. Quick response (QR) code systems: Payment systems based off QR Codes. The user scans a QR code using to complete a payment transaction. E.g. LevelUp

There are several other payment systems like SMS payment (paying via text messages), peer-to-peer payments (funds transfer between persons across borders e.g. Venmo), mobile billing (charge all your purchases to your phone bill), and few others categories.

For most part, the way these systems work is similar. You download an app onto your phone, you can link the service to your bank account or payment card. Pay. It’s that simple!

Use Cases for Mobile Wallets

Mobile wallets have many use cases beyond payments-

  1. Storing users loyalty points and rewards, coupons, special offers, automatically store all digital receipts, communicate with brands, price comparisons, storing train/flight tickets, etc.
  2. Additionally, think about all the things that we normally do while shopping – research a product, read reviews, find stores, check availability, find related videos/images, product information, wish lists
  3. Advertising of products (Brands can advertise via Alipay Wallet via Mobile banner ads now.). Up-sell/cross-sell of affiliate product and services
  4. Storing Drivers license, Healthcare ID cards, other memberships
  5. Ability for users to pay with points
  6. Brand events, invitations, etc and many other use cases
  7. Extension of Mobile Wallet to Wearables. Think Apple Watch, Google Glass, etc.

Mobile Wallet will eventually become powerful marketing platform to engage with customer. “How do you build a better shopping experience for customer? and at the same time build trust?” – this is what companies need to be thinking about. Simplicity, Security and Usability will key drivers of overall customer experience. Consumers will sooner or later expect all of the above services to be in one place.

Forward looking use cases: Internet TV i.e. enabling payment via Wi-Fi enabled internet TV is not far behind. Think about a scenario – you watch an advertisement on TV, there is an option with buy button for you to purchase that product immediately – instant gratification for all you shoppers out there. So, as you can see, there are many use cases that can be extrapolated from mobile payments.

Key players in Mobile payment space

There are different companies and technologies involved in mobile payment space with no clear leader.

  • Technology companies: Apple Pay, Google Wallet, Samsung Pay, PayPal, Microsoft Wallet
  • Retail Giants: CurrentC, Amazon, Walmart Pay, Starbucks, Alipay Wallet
  • Start ups: Square, LevelUp, Venmo, OpenTable, Powatech, Paytm (used by over 50million ppl in India), m-Pesa
  • Credit card players: PayPass by Mastercard, Visa checkout

Read more here.

Mobile Wallet is blurring the lines between physical and digital experiences. Could this mobile wallet eventually replace cards and email marketing platform? Time will tell.. but I already see some signs in that direction.

Will this transform the way we shop? Will this disrupt banks and traditional card companies? Will Apple win our heart with simplicity? What do you think? Please let me know in the comments.




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