Mobile Commerce with Frictionless Mobile Payments
Wide adoption of smartphones has made everyone believe that mobile payments will make our plastic cards obsolete. By 2020, mobile wallets will become the preferred method of in-store and digital payments, according to surveys done by Elon University’s Imagining the Internet Center and the Pew Research Center’s Internet & American Life Project. Proponents of smartphone technology are quick to highlight that this form of payment is one that simplifies transactions, loyalty programs, couponing and other incentives for financial institutions, retailers and consumers.
Everyone and their uncle are tripping over themselves in a race to launch a mobile wallet, or at least talk about their intent to produce one in time. Issuers are concerned, and so are retailers. Mobile commerce snuck up on them and the rest of us.
Juniper Research has estimated that between 2010 and 2014 mobile payments will grow dramatically, from $170 billion to $630 billion worldwide. In fact, a wide range of mobile payment methods have evolved in the past few years to include near-field communications (NFC), bar-code payments, and message or browser-based payments.
However, it must be noted that to the broad majority, mobile phones are still a device that enables us to connect and share with each other. It is not yet a device that is synonymous with enabling commerce. Mobile payments are a long way from “the chasm” in terms of technology adoption.
Mobile commerce and payments have ‘network effect’ whereby the value to any user depends on the total number of users. In addition, it has multiple sides (card holder, card issuer, etc.), where each side benefits with growth in users on the other sides. A platform that exhibits a network effect requires a critical mass of users to become viable. But, we have yet to see that with mobile payments as the mobile system is competing with the plastic credit card system – a large multi-sided network itself.
The challenge to frictionless mobile commerce is a lack of streamlined compliance standards which means that a number of different mobile wallet technologies exist. Even if a customer has a mobile wallet installed on a mobile device – that does not mean that the end institution has technology that syncs with that download. If the two technologies do not match, the consumer cannot use his or her mobile wallet at the location in question.
From a hardware perspective, the variations in mobile wallets also require varying components. Some require a point-of-sale device that consumers tap or merely bring the associated mobile device in the vicinity of the hardware to make a purchase. In this situation, retailers use near field communication (NFC), which provides for contactless, or near contactless, payments. Others use QR codes that retail employees scan to complete transactions. Some payment systems take the opposite approach and require customers to scan a QR code that the merchant produces. Having multiple approaches to facilitating mobile payments is adding confusion to the market.
The big question remains: Can we have frictionless mobile payments?
As with any new technology, standards development is a part of the process that eventually leads to mass acceptance. Standards for mobile wallets have not yet reached the required threshold to eliminate the confusion of entering the market. There is a strong indication that mobile wallets will eventually achieve the level of acceptance amongst consumers that will compel the lagging banks and retailers to embrace the technology.
Two factors are poised to accelerate this transformation; the emergence of technology standards and the emergence of new commercial models forged by innovation and regulatory pressures. Given the continued investment into mobile payments solutions it appears inevitable that they will become more of a focus for retailers and less of an oddity for consumers.
The only way to achieve frictionless mobile payments is to remove the hardware barrier completely. In today’s world most POS devices are more software driven. We can solve the hardware incompatibility problem completely via software products that enables consumers to use an e-Wallet and make a payment all without having to deal with any physical point of sale hardware.
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