Mobile payments are expected to surge in the next couple of years. Research firm Gartner expects global mobile transaction volume and value to average 42 percent annual growth between 2011 and 2016.
For a business that has already deployed mobile payments or is building a strategy around mobile payments, what should be the key considerations? Security and privacy are paramount. These are the two central attributes of a payment system that build consumer trust. The secondary considerations should include simplicity of use and universality. The more familiar the system is, the easier it is for consumers to consider and adopt. Leveraging existing behavior and usage patterns ensures quick and painless adoption. Universality, achieved partially through an emphasis on using standards and open technologies for interoperability, ensures that your business can manage B2B, B2C, P2P and global payments. The speed of the transaction — and the cost at which it is completed — should be acceptable to the consumer and merchant to ensure success.
The approach to mobile payments cannot be isolated. It must embrace the idea of mobile commerce in order to be successful. This means that a mobile payment system must be integrated with a number of other systems and processes that make up a complete transaction. At the front-end of the mobile commerce construct is the merchant environment. This is where a consumer makes a decision to purchase a product or service. The payment can be initiated through a payment gateway, a POS terminal, or a remote payment engine. The payment must then deal with a number of sub-processes that include User Management, Offers and Loyalty Programs, Transaction Processing and Servicing. Each one of these has an external interface with which the system must interact, authenticate the customer and update the customer’s records (see figure below for a Functional Mobile Payment Architecture).
Despite the buzz around mobile payments, adoption has not matched expectations. The key reason is the lack of common standards. This has been aggravated by the fact that merchants have been unable to create compelling models that offer greater conveniences than existing modes of payments. In addition, Near-Field Communication (NFC) payment terminals are expensive. However, with global majors like Citi, MasterCard and Visa promoting chip-based cards, we can expect merchants to adopt NFC sooner rather than later. Also, stringent mobile payment solutions around cards, that meet regulatory requirements to address fraud, are being rapidly deployed worldwide, resulting in greater adoption.
Examining the two factors — the technology at play for the various payment mechanisms and the barriers to adoption — will help you understand where your business must focus to stay on top of the mobile payments trend. This will ensure your business has a high level of preparedness to leverage the trend and deploy mobile payments as early as this year itself.