Mo­bile Pay­ment Trends

Trends that will drive the cash­less econ­omy.

Voice&Data - - CONTENT - San­jay Kr­ish­na­murthy [email protected]­ber­me­

The rapid adop­tion of mo­bile pay­ments ap­pli­ca­tions, sup­ported by ad­vances in dig­i­tal­en­able­ment tech­nolo­gies, is truly a “tale of two mar­kets.” The driv­ers in the de­vel­oped or ur­ban mar­kets are cus­tomer con­ve­nience and lower cost-per-trans­ac­tion, sup­ported by tra­di­tional banks with their ex­ist­ing net­work of branches and ATMs. The driver in the emerg­ing or ru­ral mar­kets is – at least ini­tially – a so­cio-eco­nomic cause to pro­vide ser­vices to un-banked and un­der-banked pop­u­la­tion.

Mo­bile pay­ments tech­nol­ogy as an offering in emerg­ing mar­kets has re­sulted in many small busi­nesses get­ting a new “lease on life” in tight economies. The lo­gis­ti­cal dif­fi­cul­ties and costs of in­stalling land­lines for ge­o­graph­i­cally re­mote com­mu­ni­ties makes wire­less com­mu­ni­ca­tions based mo­bile pay­ments an at­trac­tive op­tion for th­ese busi­nesses. In In­dia, the new, non-bank “pay­ments bank­ing” providers will likely help th­ese busi­nesses as they at­tempt to de­liver ba­sic fi­nan­cial ser­vices prof­itably.

In the de­vel­oped mar­kets the mo­bile pay­ments space is get­ting in­creas­ingly com­pet­i­tive, with banks and non-banks striv­ing for in­sight­ful data, mar­ket dom­i­nance and con­sumer loy­alty. In 2014, we saw the rise of the “cash­less so­ci­ety” in the de­vel­oped mar­kets that in 2015 will drive fur­ther de­cline in con­ven­tional re­tail bank­ing.

Trends in Mo­bile Pay­ments

Some of the trends that are most dom­i­nant in de­vel­oped mar­kets in 2015 are:

Wear­able Pay­ments – Commerce

of Things: The more ob­jects con­nect to the In­ter­net, the more meth­ods of pay­ment will be­come avail­able. Cou­pled

with in­no­va­tions in in­for­ma­tion se­cu­rity and pay­ment ser­vices, th­ese new forms of pay­ment will en­able in­creas­ingly fric­tion­less pay­ments. We like to say that the “In­ter­net of Things” will in­evitably be­come the “Commerce of Things.”

Prox­im­ity Pay­ments – Con­tact­less

Adop­tion: Con­tact­less trans­ac­tions are grow­ing at the rate of 200% to 300% a year in some mar­kets. With ris­ing con­tact­less adop­tion, the point-of- sale (PoS) read­ers in place can be used for Near Field Com­mu­ni­ca­tion (NFC) trans­ac­tions, and it is a small be­hav­ioral step for con­sumers to mi­grate from con­tact­less cards to mo­bile NFC (or to other con­tact­less tech­nolo­gies such as QR codes or bar codes).

Mo­bile Wal­lets – End-to-End Pur­chase In­te­gra­tion: Pay­ments are be­com­ing an in­te­gral part of dig­i­tal commerce, where pre and post pur­chase ac­tiv­i­ties such as search, com­par­i­son, se­lec­tion, pay­ment, and re­wards op­er­ate seam­lessly to­gether in dig­i­tal wal­lets.

Re­tail In­no­va­tion & Re­tailer Apps: On­go­ing rapid in­no­va­tion in re­tail, es­pe­cially around om­nichan­nel re­tail­ing, where con­sumers switch be­tween chan­nels such as mo­bile, In­ter­net and shops to com­plete a pur­chase.

Cloud-based Pay­ment So­lu­tions: There are an in­creas­ing num­ber of mo­bile and In­ter­net ap­pli­ca­tions, most no­tably Ap­ple iTunes, Master­Card Cloud Based Pay­ments, where cards are reg­is­tered once in the cloud and then re-used within th­ese ap­pli­ca­tions to make pay­ments when a pur­chase is made.

Real-time Pay­ments: In the few coun­tries that cur­rently have a real time pay­ments ca­pa­bil­ity, such as the UK, it is en­abling new busi­ness mod­els, in­clud­ing im­me­di­ate avail­abil­ity of funds af­ter on­line loan ap­proval.

Vir­tual Crypto-cur­ren­cies: Anal­o­gous to phys­i­cal gold as a store of value and to phys­i­cal cash in the way value is trans­ferred, th­ese vir­tual cur­rency of­fer­ings – such as Bit­coin and Lite­coin – are driv­ing a wave of in­vest­ment and in­no­va­tion by com­pa­nies such as Bitpay. In the months to come, it is highly an­tic­i­pated that dig­i­tal cur­ren­cies will be used inter- change­ably with le­gal ten­der, cre­at­ing a new pay­ment sys­tem that will ex­pand be­yond the ex­ist­ing fi­nan­cial ecosys­tem.

Reg­u­la­tion: The cross-in­dus­try na­ture of mo­bile money prompts reg­u­la­tors, in both the tele­com and fi­nan­cial sec­tors, to con­front im­por­tant ques­tions and de­velop a new gen­er­a­tion of fi­nan­cial reg­u­la­tion. This leads to the emer­gence of new reg­u­la­tory con­cepts of e-money and pay­ment. The ad­verse im­pact of reg­u­la­tion on card prof­itabil­ity is making non-card pay­ment propo­si­tions more at­trac­tive.

The Role of Cus­tomer Ex­pe­ri­ence

A cash­less econ­omy is the fu­ture vi­sion of the mo­bile pay­ments in­dus­try. With the rapid growth of smart­phone own­er­ship the world over, this vi­sion is fast be­com­ing a re­al­ity. But it is the con­sumer ex­pe­ri­ence when pay­ing for goods and ser­vices us­ing their smart­phone that will really tip the scales. Make it seam­less, com­pelling and se­cure, and users will go for it. Though it is still early days, the age of seam­less pay­ments is com­ing. Com­pa­nies tak­ing a “con­sumer first” ap­proach to their user de­sign and mo­bile pay­ments strat­egy to­day will be well-po­si­tioned in this cash­less econ­omy.

Not long back, Ap­ple CEO Tim Cook an­nounced that more than 1 mil­lion credit and debit cards were hooked up to Ap­ple Pay within three days of the launch. Sub­way, McDon­alds, Wal­greens, Uber and 220,000 other ven­dors have al­ready signed up to re­ceive Ap­ple Pay.

Re­cent ru­mors sug­gest that other mo­bile pay­ments providers have re­ceived a boost fol­low­ing the launch of Ap­ple Pay. For in­stance, Google Wal­let has had con­sid­er­able growth in the last couple of months fol­low­ing the un­veil­ing. And with Google’s An­droid op­er­at­ing sys­tem hav­ing an es­ti­mated 80% of the global mo­bile phone mar­ket, one can be sure that Google Wal­let will ride the coat-tails of Ap­ple Pay for as long as it takes to make this new pay­ment method an ev­ery­day ex­pected be­hav­ior.

Though it is still early days, the age of seam­less pay­ments is com­ing. Com­pa­nies tak­ing a “con­sumer first” ap­proach to their user de­sign and mo­bile pay­ments strat­egy to­day will be well­po­si­tioned in this cash­less econ­omy.

(The au­thor San­jay Kr­ish­na­murthy is Ser­vice Line Leader-Dig­i­tal, Opus Con­sult­ing So­lu­tions. This ar­ti­cle was firstpub­lished in CIOL)

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