Mobile payments have actually been around for a few years now, but have only recently made the kind of impact that makes consumers and businesses take note. Unsurprisingly, mobile payments refer to financial transactions that are performed using a mobile device, most commonly a smartphone. As an alternative method of payment to debit cards or cash, mobile payments have gained in popularity all over the world, with businesses ranging from tech giants to independent startup all vying for market share in this fledgling industry. As with any other new technological phenomenon, mobile payments are sure to create as many disruptions as opportunities, so it’s vital that businesses carefully manage the introduction of new payment platforms.
Apple Pay kicks things off
Although Apple Pay were not the first mobile payments platform, they are being credited with kick-starting the mobile payments explosion. According to CEO Tim Cook, in excess of one million credit cards were registered to Apple Pay within three days of its US launch. By contrast, prior to the Apple Pay launch a number of other mobile payments platforms were struggled to make much of an impact and some, like Square Wallet, were eventually discontinued. The reason why Apple has succeeded where other have failed is due to a multitude of factors.
Firstly, Apple has developed a track-record for bringing innovation into the mainstream, even when they can’t claim to have come up with the idea themselves. MP3 players, smartphones, wearables and now mobile payments have all benefitted from the consumer attitude towards Apple products. Moreover, Apple made sure they created a service that had convenience as its number one concern. Apps like Google Wallet may have existed prior to Apple Pay, but cannot claim to be as intuitive. Google Wallet, for example, required consumers to take their phone out of standby mode and enter a PIN when they wanted to make a transaction. With Apple Pay, users simply press their phone against a payment terminal and let Touch ID verify their identity.
Lastly, the success of Apple Pay in the mobile payments market is also the result of good timing. Other mobile payment businesses were guilty of trying to implement their ideas to soon, particularly when NFC hardware was not mainstream enough to facilitate transactions. Time is also crucial for getting consumers on-board. It now seems completely natural that we would make transactions and carry out bank transfers with our smartphones, but go back a few years and the public were less receptive.
A growing market
Although Apple Pay will be pleased with its initial popularity, the Cupertino-based firm will be well aware that competition is mounting. The main contenders include Samsung Pay, Barclays bPay and Android Pay and each have their own bespoke features. Samsung Pay perhaps holds an advantage over Apple Pay, particularly in the US, because it is compatible with magnetic card readers, which remain prevalent in many retailers. Android Pay (the re-branded Google Wallet), meanwhile, offers its own compatibility advantages because it should work with all smartphones and tablets operating Android 4.4 or above. Apple Pay, on the other hand, is only compatible with iPhone 6 and later devices, as well as select Apple tablets and Apple Watch-compatible products.
Barclays bPay can lay claim to be the most distinct of all the mobile payment offerings. Users must add money to their bPay account and then purchase either a wristband, key fob or sticker to interact with contactless terminals. Although some consumers will be put off by having to purchase another peripheral to work alongside their smartphones, bPay may benefit from being associated with a well-known and respected bank. Alongside the heavy hitters in the mobile payments space, businesses should also be aware of smaller players such as Bolt, Cover and Coinbase.
If there is one major hurdle that mobile payments must overcome if they are to continue their upward momentum it regards security. While fingerprint recognition and PIN authorisation can help secure point-of-sale (POS) transactions, online purchases are still being targeted by fraudsters. The use of biometric authorisation for online sales has been mooted, but it remains to be seen whether this will gain much traction. Of course, for businesses like Google, Apple and anyone else in the mobile payments space, security must become a number one priority. As well as financial repercussions in the form of fines and compensation, a data breach could lead to long term reputational damage.
Perhaps the biggest security hurdle that mobile payments have to overcome is one of perception. Although progress is being made, consumers may still view mobile payments as being inherently less secure than debit cards or cash. Over time this is likely to change, particularly if mobile payment firms continue to introduce robust security protocols like multi-factor authentication and tokenisation.
Innovate or risk irrelevance
For businesses looking on at the growth of mobile payments, it is important that they do not dismiss the phenomenon. Even banks, with their long-established methods, are beginning to realise the importance of innovation. Mobile payments are hugely convenient for customers and the introduction of loyalty points and rewards for mobile transactions is only likely to increase the popularity of paying by phone. Smartphone applications are also realising that mobile payments can help them to monetise their services. Businesses are offering “buy” buttons alongside their mobile ads to streamline transactions. It is likely that further revenue streams will also become available as the mobile payment market develops.
Some retailers in the US and UK have been reticent to accept mobile payments, particularly if they need to invest in new hardware, but this investment is unlikely to go unrewarded. If businesses can use mobile payments to deliver quicker, more reliable transactions to their customers, then everyone stands to benefit. Cash and cards may not be overly worried about being overtaken by mobile payments just yet, but continuing developments will only see this technology go from strength to strength.
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