Entries tagged with “Mobile”.


New Harris Poll released last week led some insights into consumer views on mobile payments.  Among the highlights of the poll is that more than 60% of respondents believe that smartphone payments will eventually replace cash and card payments.  This number is very high when compared with the number of respondents that have actually made (4%), or even witnessed (8%), a smartphone payment.  What’s more, far fewer respondents believe that this transition will occur within the next five years.  Contrast this with the media “Year of Mobile” pronouncements (that have occurred for the last two years, at least) and one would rightly ask where the disconnect is.  Media keeps saying mobile payments are imminent, while consumers seem to be hesitant.

One of the major variables for most consumers in using smartphone payments is the question of security.  According to the Harris Poll, “Among those who indicate being either not very or not at all interested in being able to make smartphone payments, security is a clear, if predictable, factor: half (51%) say they don’t want to store sensitive information on their phone, and four in ten (40%) don’t want to transmit sensitive information to a merchant’s device.” (Here is should be noted that there are mobile payment products that allow payments to be made without (1) storing payment data on the consumers phone or (2) transmitting sensitive data to the merchant’s device.)  Another significant portion weren’t interested in making smartphone payments simply because they did not own a smartphone.

So I put it to you, reader.  What do you think about smartphone payments?  Have you made one? Would you make one?  What factors or criteria are necessary for you to adopt this new technology?  Or are you just waiting for it to reach critical mass  so that it’s available in places that you frequent?

In the United States, “mobile” is a matter of convenience. We’d like things to be easier, to be faster.  In other parts of the world, though, mobile technology brings with it life-altering capabilities.   An ex-Apple executive has launched a start-up designed to help lift whole communities out of poverty.  mPowering is designed to help incentivize positive behaviors, such as attending school,  by awarding points for those behaviors.  The points can then be redeemed for food and other necessities.  mPowering provides families with phones and supplies chargers at schools.

In similar way, mobile payments have gotten swift adoption in regions in which many people have no access to banks or financial institutions. M-Pesa in Africa has revolutionized financial practices in rural and less developed areas of Africa.     It’s estimated that almost 50% of the adult population of Kenya use the service to send money to relatives, pay bills, and even to pay for services.  Essentially, the phone acts as a prepaid card.  Users sign-up and “load” funds to the phone. As more and more individuals adopt the technology, more businesses are beginning to accept M-Pesa payments.

Mobile payments and mobile in general have taken off much more quickly in less developed countries.  Theories are that this is because of, rather than despite, the lack of infrastructure to be found.  Mobile technology can have a profound impact on economies, families, and communities.  That stands in stark contrast to first world, western cultures in which mobile technology is often a sign of affluence and position.  An article earlier this year by Dr. Hamadoun Touré sums it up well: “With seven billion people’s needs to serve, information and communications technologies (ICTs) represent the single most powerful channel we have ever had to reach out to others, wherever they may live, whatever their circumstances. They also represent our best hope of accelerating progress towards meeting the Millennium Development Goals (MDGs) by the target date of 2015.” It’s that power, not just the cool factor,  that makes mobile technology so exciting.

Mobile technology seems to be in the news quite a bit today.  Instagram, a social photosharing, site was  acquired by Facebook.  AisleBuyer, a line-busting mobile commerce application, was acquired by Intuit.  Best Buy is looking at mobile strategies to combat the phenomenon of “showrooming,” in which consumers come to the retail store to look at the product, then make the purchase from Amazon, or eBay or another eCommerce site.  Mobile commerce, mobile payments, mobile social.  It seems that mobile is everywhere.  What does that mean for merchants?  What should merchants be looking for in the mobile revolution?

Something that often gets overlooked with the introduction of a new technology is that of strategy.  Merchants often rush to the new technology that promises convenience, increased conversion, and cool factor.  But the question that we should be asking is, “Why?”  Does mobile even make sense for me?  Consider a traditional, independent bookstore.  They have a storefront and inventory.  They get foot-traffic and have a traditional Point of Sale (POS) system that is integrated into their inventory management system.  What would a mobile acceptance channel add to them?  On the other side of that coin, consider a crafter or a locksmith.  Often, these professionals operate in the field – at craft fairs or in parking lots.  They have traditionally accepted cash or checks.  Recently they’ve begun to use either a “knucklebuster” or an IVR system to accept payment from debit or credit cards.  For them, mobile payment acceptance makes sense – they can increase their conversion rate (and sometimes their average ticket size), cut back on “bad” transactions with real-time authorization, and add convenience for themselves and their clients.

Another factor that must be considered is security.  Just because a payment is mobile, that doesn’t mean that security goes by the wayside.  In fact, some (including myself) may argue that security becomes more important.  Encrypted card readers are just one layer, albeit a very important layer, of protection for the payment process.  Choosing a service provider with a demonstrated history of compliance with the Payment Card Industry Data Security Standard is another important step in protecting mobile payments.

Mobile payments are an exciting innovation in the payments world.  They offer significant advantage, but as with any tool, they must be managed appropriately in order to recognize the maximum benefit.

Dr. Heather Mark, PhD.  SVP, Market Strategy

Industry pundits have been anxiously declaring the “Year of NFC” for the past several years. Near Field Communication (NFC) was supposed to revolutionize the way customers interact with the point of sale. Various beneficial consequences of NFC adoption have been touted - everything from security to efficiency and just about everything in between.  Large companies have put a tremendous amount of resource behind igniting NFC platforms.  So much emphasis was placed on the likely success of NFC that three wireless giants formed a joint venture, ISIS, dedicated to the prospect.  However, NFC has failed so far to take off as has been expected.  In fact, at least one company recently jettisoned its NFC plans after tests revealed that “NFC is actually a step backward” in the Point of Sale (POS) experience. While plans remain to work with NFC technology in some capacity, the company has stated that it doesn’t fit with its POS strategy.  So what does this mean for NFC?

First, it should be noted that a number of companies remain devoted to the notion that NFC will enjoy mainstream adoption in one capacity or another in the near future.  The card brands and other companies are still experimenting with NFC technology in a variety of capacities.  That means that we’re going to continue hearing about the Year of NFC for some time yet.

Secondly, it should also be noted that the emphasis in payments now, particularly with mobile technology, is moving away from the traditional POS.  Mobile technologies should allow merchants greater freedoms.  NFC, by nature, requires customers to go to the checkout counter in order to make a purchase, so while it’s a mobile technology in that it’s deployed on a SmartPhone, it is not mobile in allowing merchants to accept payments in a mobile fashion.  Nor does it free customers from having to stand in line at a terminal in order to make a payment.

When examining mobile solutions, merchants are well-served to ask some questions of themselves before selecting a vendor.  First, merchants should have a sound understanding of what their mobile strategy is.  If the merchant has a high-volume, low-price business, like a convenience stores, then NFC may be a good option. However, many small merchants are looking for mobile solutions that will free them from the check-out counter.  So, if a merchant is looking for a truly mobile solution, what are the options?

Text – Simple Message System (SMS) is a system for sending short text messages between mobile devices.  Text or SMS payment solutions are growing increasingly popular in the realm of digital sales and Peer to Peer (P2P) payments.  In this model, a payment authorization is transmitted via text message and the amount of the payment is charged to the user’s mobile phone bill.  This method proves effective in high-volume, low ticket sales, such as P2P or digital goods.  However, there are still some points of concern for merchants, not the least of which is “When does the merchant get paid?”  Customers, too, may have questions.  When using a payment card, there are fraud and theft protections.  If the card is stolen or used for a fraudulent transaction, the customer is not held liable.  Similar regimes do not necessarily exist in this model.

Portable Card Swipe Device –  The most prevelant form of mobile payments to date, is not surprisingly, the portable card swipe device (See ProPay’s JAK).  The reason this is so prevalant is because it offers mobility without requiring a significant change in behavior from either the merchant or the consumer.  The action of paying is almost exactly the same as it would be “in store.”  The caveat to this type of solution is that merchants should ensure that the product they are using is what is called an “encrypted swipe” device.  Using and encrypted swipe device ensures that the payment data is protected before it even gets to the phone – it is encrypted by the magnetic head that reads the card data.  If the merchant loses the phone, or if a “hacker” breaches the payment application on the phone, no card data would be available to them.

Application Based -The application based mobile payment has not been as prevalent in the mobile payment movement as the previously discussed methods.  With the rapid adoption of Smartphone technology, though, these types of solutions are likely to become more prevalent.  In this model, a consumer downloads an application to their Smartphone and configures his or her user profile and payment methods.  The consumer and the merchant can then interact through that application.  Merchants and consumers should do due diligence to ensure that security has been built into the application, but these types of applications are on the rise.  (See ProPay Link)

NFC will not be abandoned in its entirety, but neither will it be the paradigm shifting payment technology that had been envisioned. At the end of the day, there are applications for each of the mobile technologies discussed here.  The challenge for merchants is to find the one that best fits their overall business strategy and offers robust security for their customers.

Dr. Heather Mark, PhD; SVP of Market Strategy

One of my favorite things about the Payments industry is the pace of innovation.  Five years ago, when the Payment Card Industry Data Security Standard became mandatory, the industry buzzed with ingenious new ways to secure cardholder data.  Today, terms like “end-to-end encryption,” “tokenization,” and “encrypted at the swipe” are commonplace.  In fact, those technologies are now more often the rule than they are the exception.  Today, the industry is abuzz with a new phenomenon, the mobile payment platform.  Again, it is startling to see how quickly companies can develop both hardware and software to meet the clamoring demands for mobile methods.  Here is a brief discussion of those methods.

Near Field Communications (NFC) – In NFC technologies payment data is stored on a chip or device in the consumer’s phone.  When a purchase is to be made, the phone or other NFC-enabled device is “waved” near special equipment on the merchant side.  The purchase is approved and the consumer can walk out.

The benefits of such a solution are its speed and ease of use.  The consumer is required to do no more than wave the device near the merchant’s specialized POS.  For small purchases, the convenience is difficult to beat.  The challenges include the limits on the size of the purchase, its storage of data within the NFC device, and the requirement for the merchant to purchase special equipment to accept those payments.  With more and more providers offering NFC, the prices for the merchant-side equipment are beginning to fall, but merchants have been reluctant to adopt this technology as it does require a purchase of equipment.

Text/SMS – Also referred to as carrier billing, Text/SMS payments are particularly popular for merchants of digital goods, such as games, music, and ring tones.  The carrier billing model is growing increasingly popular in the realm of digital sales and Peer to Peer (P2P) payments.  In this model, a payment authorization is transmitted via text message and the amount of the payment is charged to the user’s mobile phone bill.  This method proves effective in high-volume, low ticket sales, such as P2P or digital goods.

Application-Based Payments – With the rapid adoption of Smartphone technology, these types of solutions are likely to become more prevalent. In this model, the user downloads the payment application and enters their preferred payment methods.  The secure storage of this data is fertile ground for debate, as there are proponents of storing the data on the phone itself, and others that prefer the data securely stored with the application’s provider in an encrypted or tokenized form to reduce the likelihood of misappropriation of data.  The application based model provides significant opportunities for value-add functionality, such as coupons or reservations.

In addition to these technologies, the eWallet, or at least the term, has become ubiquitous.  The eWallet allows users to link their payment cards to an application or device (usually an NFC chip) in order to facilitate payment.  Many companies are pursuing mobile payments through the adoption of the eWallet.

The next 12-18 months will be interesting in that the market will likely settle on a preferred model.  Of particular note is the very real possibility that the model that emerges will be a combination of those technologies discussed previously, or even one that has yet to be introduced.

Dr. Heather Mark, PhD;  SVP Market Strategy