Background Overview & The Market
Mobile Payments is a revolution waiting to take over the transactional world as we know it. It roots back in the early days of mobile marketing when mobile Operators were selling ringtones and mobile wallpapers through their WAP platforms or via the SMS technology. Lately, and with the growth of the increasingly advanced smartphone technologies, it has evolved to something greater, something that users could really benefit and change the way the conduct transactions for both physical and virtual products.
So what really defines mobile payments? Mobile payments is not just another mobile commerce transactional mean, it is an alternative payment method instead of using the usual cash, check or credit cards users pay using their mobile phones and/or their phone bills to pay for products and services. According to a research conducted by IE Market Research global mobile payments have surpassed the $40 billion mark and are expected to grow as close to $1 trillion by 2016, showing that there is a rapidly increasing interest in the use of mobile devices as mobile plans as core transactional means.
However, to reach the next level towards a standard payment method rather than a minor exception, we should not ignore all the structure around mobile payments that is carried out. Overall, adoption of mobile financial services is context-driven meaning that a “one size fits all” approach does and will not work in such industry. In order to develop successful mobile payment services, marketers must have a clear understanding of its context and find a service that best suits its context. Differentiation between markets must occur in terms of the overall proposition behind mobile financial services. Consumer needs and perceived obstacles and benefits that shape the mobile ecosystem, along with technological developments all need to be taken into account.
But what is keeping such opportunity from evolving into something broadly used? A study found that 25% of American consumers are willing and happy to make mobile payments but they are concerned regarding the device’s and the SMS securities, barriers that be overcome by investing time. Mobile marketers will have to address such challenges during 2012.
The ability to pay via mobile is seen as a major differentiator for US consumers when it comes to staying loyal into a Bank or an Operator. Mobile payment is being adopted all over the world in different ways. But what are the specific transactions involved in mobile payments. According to a Global Consumer Telecommunications Survey, some of the most common transactions include:
- Merchandise purchases
- Bill payments
- Mobile money transfers
- Purchase of digital products
- Transportation payments and ticketing
The mobile payments industry is a complex one. There are several types of mobile payment implementation methods, such as wireless transfer or contactless point of sale payments. To enable mobile payment services there are various technologies, for example Near Field Communication or SMS. Combinations of technologies and business models add up to a large variety of mobile payment services.
There are four primary models for mobile payments:
- Premium SMS based transactional payments: Such service is used when consumers are required to send a payment request via an SMS text message to a dedicated short code. In such method a premium SMS charge is applied to the customer’s phone bill received at the end of the month. As soon as the payment has been received by the mobile Operator the retailer or merchant involved in the transaction is informed of the success process of the payment and can then release the paid for goods. In such transaction a typical
- Direct Mobile Billing: Such mobile payment solution is heavily used in various Asian countries and mostly when users make online purchase. Prior to check out users are asked to send a keyword to a short as with premium SMS payments in order to receive a pin and a one-time password, to increase security. The transaction is later charged directly on the customer’s phone bill and not as an SMS message as with the Premium SMS transactions
- Mobile web payments: Often confused with mCommerce, mobile web payments enables consumers to make purchases and complete transactions through a mobile application or a web page using their mobile line to make a payment. Such particular mobile payment application has a number of benefits such as: Follow-on sales, High Customer Satisfaction and Ease of use.
- Contactless NFC (Near Field Communication): NFC is used mostly in paying for physical purchases made in retail stores. Consumers use a special mobile enabled phone wave their phone near a reader module. Most transactions do not require authentication, but some require authentication using PIN, before transaction is completed. The payment could be deducted from a pre-paid account or charged to a mobile or bank account directly.
Business Benefits & The State of The Market
It is a fact that the popularity of m-payments is rapidly increasing throughout the Asian market where advancement in technologies flourish due to the early adoption nature of the consumers. Businesses enable users to complete transaction towards their products and services through mobile technologies or through the existing carriers.
Merchants around the blog, and more specifically in the western world, are beginning to see the advantage of mobile payments as an additional source of revenue and a great potential to their business in a sluggish global economy. Part of the effort to increase the acceptance of such solution is enabling merchants with the technology to receive this method of payment from customers. Industry-wide efforts are underway to develop standards as the technology spreads throughout the world.
Businesses are provided with the opportunity to engage their consumers even further. By using their mobile device or mobile line to make purchases businesses are able to profile their consumers taking the whole busing experience in a more personal communication, able to provide customized solutions and shape more personalized offers. All the above can be tracked and shaped by the client’s purchasing behavior, likes, preferences and potential needs. Therefore there is a great potential for mobile CRM and loyalty campaigns to be undertaken in the near future.
More and more retailers are incorporating POS technologies like NFC to their transactional means. Technologic companies have evolved with Google, PayPal and Amazon being the first out of a number to come. In addition to that, text based companies are also making a great impact on the expansion of mobile payments in the western world like Text2Pay.