Mobile payments are expected to send cash and paper invoicing the way of the dinosaur, but perhaps not in all the ways the industry expects.
While banks have proven to be less than enthusiastic when it comes to retail banking over mobile, the small to medium business sector has a lot to gain from mobile payment technologies, says Diarmuid Mallon, Head of Product Marketing, mCommerce, at Sybase 365.
Sybase365’s Diarmuid Mallon
Corner stores and ‘mom and pop’ retailers have the most to gain from these advances, both here and in emerging countries. The massive increase in mobile phone and smartphone usage means that potentially every consumer as the ability to perform business to business (B2B), consumer-to-consumer (C2B) and business to consumer payments (B2C).
The public sector is even starting to go further and we will soon be seeing more of governmental organisations and payment-to-citizen (G2C) operations – such as payment of council tax and licensing via mobile.
As well as the convenience factor of mobile, it also adds security for shop owners and delivery drivers (less cash changing hands lessens the chance of robbery) and automatic digital invoicing, such as fees appearing on phone bills, reduces amount of paperwork floating around.
At the most basic level, SMS transactions accepting/requesting payments or ordering stock via SMS or mobile browsers have been around for some time now, but more sophisticated smartphone app and NFC systems are in development.
Much of Sybase365’s mobile business models grew out of its development of the Paybox mobile payment platform in Austria 12 years ago. It remains the country’s leading payment system, and is accepted at over 5,000 points. 300,000 subscribers pay via direct debit, and more than 2 million paying via mobile phone bills. It also acts as a distributor for electronic top-up services for operators including T-Mobile, Telering and Hutchinson 3.
Most recently the company was selected by Telefonica (O2) to develop its mobile wallet, which will be rolled out to 26 countries worldwide. It is expected this will include the UK under O2, but Mallon would not be drawn to confirm this.
"It will go live in a number of countries this year, but they haven’t announced where yet. So I can’t be the one to steal their thunder I’m afraid," he said.
The core proposition of this global venture is interoperability.
"They realised very quickly that if you have a wallet that doesn’t talk to anyone else’s wallet, it will struggle to take off," he said.
Most countries have fractured market share amongst banking and mobile operators. Safaricom in Kenya, which holds an 80% market share, could go their own way if they desired, but for the majority of markets it’s not feasible to force your own standard.
It’s not even particularly logical. Mobile and virtual payment systems need to work around the world, in a variety of situations, utilising a variety of different technologies.
"In North America, NFC may be fine. But in Latin America your merchant may literally be a guy standing at the traffic lights with a trolley," he said.
Ten years ago when Sybase first started developing their mobile payment systems, there were no mobile wallets, NFC or virtual payments. Mallon emphasizes that payments, of themselves, were channel agnostic then, and they remain so now. Any company ‘locking’ themselves into a closed set of standards is foolish.
"A channel just triggers a payment. However, what you do need to do, depending on the channel, is apply different business logic in terms of security."
So while payments coming through NFC or a smartphone app have potentially already been through a host of verification measures, text and mobile browser payments have had almost no scrutiny or authentication.
This means that the software conducting the business needs to adjust itself accordingly, whether its risk management via limits to withdrawals, or identity verification.
Even in countries where NFC and other fully virtual payments eventually take place, SMS still has its uses. Paybox’s SMS car parking system still accounts for 16% of car parking payments in Vienna – simply because it’s faster.
"And of course NFC only tackles proximity payments, which is at most only half the use cases."
The limited deployment of devices that have NFC capability – be it mobiles or point-of-sale – mean that it cannot be considered to be a sensible focus.
"NFC gives a wonderful user experience, the problem is it’s not very good for producing a business model that makes money. NFC penetration is never going to be 100%, and for a long time its rarely going to even reach 50%," said Mallon.
PayPal is one company that has backtracked on its support for NFC, dropping the development of its NFC mobile point-of-sale plans. Noises from its execs suggest that they now believe NFC to be dead-on-arrival – that is, by the time it has mainstream acceptance users will already have all their information in the cloud and find the idea of physical commerce silly. Mallon believes its foolish to disregard any channel.
"As a mainstream technology [NFC] still at least two years off. You can sit and wait for it, but for most businesses that’s not really an option. For the vast majority of mobile payment solutions out there today, they are running very well without NFC," he said.
Some evolving test cases:
B2B: Sending it (Cash On Delivery) COD: Delivery drivers exchange goods for cash making them a prime target for robbery. The merchant is also at risk here as they must keep cash in the store. Mobile payments could eliminate this threat and no cash would have to change hands.
C2B: Travelling to Pay the Bills: People in developing countries face a number of payment challenges. Unbanked consumers have few options when it comes to paying bills for services like water and electricity. The ability to send and receive mobile payments could give consumers a quick and secure way to pay utility companies and merchants as well as receiving pay checks.
C2C: Disbursement: Mobile payments for charity donations hit the mainstream in 2010 with the Haiti earthquake. Cash was difficult to distribute to Haiti’s largely unbanked population of suppliers and those displaced. In 2010 85% of Haiti’s households had access to a mobile phone. With this type of penetration the mobile channel is unsurprisingly a good fit and which is why NGOs are increasingly looking to use mobile payments as a safe, affordable and faster alternative to cash.
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A chat with Fiserv’s Serge Van Dam, another leading provider of mobile payment solutions.
Contact the author: @allanswann