Mobile payments can provide a great way for consumers to pay for their purchases with their smartphones at the point of sale. Since smartphone ownership is expected to jump to72 percent of all mobile-phone users in 2016, web merchants need to consider their mobile payment options. (Smartphone ownership is at 51 percent today, [ Javelin, 2012].)
Many in the mobile payments industry are using Near Field Communication (NFC) technology, where a computer chip is embedded in a smartphone and can be tapped at a reader at the point of sale.
Google Wallet started using NFC mobile payments last year and is the biggest user of NFC mobile payments. “We think NFC is a great user experience and today provides the broadest reach in terms of merchant coverage compared to other technologies,” said Google Wallet head of product management Robin Dua.
Yet even Google Wallet has been slow to gain momentum, partly because it is available on only six devices. It’s currently undisclosed how many people use Google Wallet or how much money the system handles each month.
Of course, there are hurdles to overcome before widespread adoption of mobile payments can happen. While banks, merchants and technology providers have invested billions in the technology, it’s going to take years before these investments pay off. Google Wallet is a leader in its quest to set the new standard for mobile payments; however, this is just the tip of the iceberg in the huge market expected by 2020.
There are a number of choices for consumers and merchants, but many of these people are not familiar with the all competing technologies. Right now, most consumer-use of smartphones for financial activities is limited to checking bank balances, making deposits or using their smartphone browsers for online purchases.
Some merchants are hesitant to upgrade their technology to NFC because it’s not clear yet whether this will become the industry standard. Visa and MasterCard are giving consumers incentives to make the switch, but people can be slow to change their banking behavior.
Payment System Delays
Isis is the joint venture of AT&T, Deutsche Telekom, T-Mobile, Verizon Wireless and Vodafone Group-UK. This joint venture of wireless telecom carriers was going to conduct the first test of its mobile payments service this month in Austin, Texas, and Salt Lake City; however, the test has been delayed. The Isis payment system didn’t give a reason for the delay, which was one of several since the venture was formed two years ago, indicating it would provide an update next month.
In the meantime, hundreds of millions have been spent on mobile-payment-related start-ups like Cardspring, Clinkle, BoxPAY, DigiMo and Paydiant. Some rely on technology other than NFC by offering services that allow people to pay for purchases by sending text messages or by scanning product bar codes using a phone’s QR-code reader.
Coupons & Offers
The new phones and new payment products alone will not be able to drive mobile payments. Mobile payments providers must entice consumers with targeted coupons and offers in order to convince them these systems are more valuable than ordinary plastic, which has been a reliable payment system for many decades.
As mentioned before, many consumers aren’t familiar with mobile payments, and that means it will take a long learning curve for the technology to take hold. And that includes both consumers and the sales associates selling the devices, who must be educated in how the different systems work.
Despite the convenience of mobile payment services, the jury’s out on whether all web merchants should start adopting them. For retailers, it’s a good idea to get in on the ground floor. For instance, I unexpectedly bought a piece of jewelry being displayed at Curves, and the seller presented me with her iPhone, which had Square as the mobile payment provider. She had to write out a receipt, though. I thought it was cool – signed my name with my fingernail. From my POV, it’s a big convenience – didn’t need plastic. The seller, of course, has to pay a monthly fee for the service, probably similar to the fees charged for plastic.
Information on Mobile Payment Systems
If you want more information on mobile payment systems, PC World recently did some in-depth reviews of the following systems.