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Comment: The mobile payment revolution

Comment: The mobile payment revolution
Monday February 20 2012

The increase in smart mobile technology such as smartphones and tablets has led more consumers to e-commerce, establishing a new form of remote payment and a host of new face-to-face payment services. By Julian Wallis

The use of a phone to purchase a product or service is increasing in popularity and mobile payment now covers a wide range of situations.

The first is the use of your phone as a face-to-face payment method in high street shops, thanks to a (chip or other) system featuring Near Field Communications (NFC) technology, which enables “contactless” payment for your purchases. Despite full-scale trials and some degree of media impact, it has to be said that we are still far way away from seeing large numbers of consumers and merchants making use of this. To date, NFC “contactless” technology has, to a large extent, both proved its worth and found its market in the field of travel, thanks in part to the Oyster Cards in the London area.
The second has come out of the emergence of smart phones and touch-sensitive tablets. A mobile user can access an e-shop via the integrated browser on his or her device or via a specified mobile application and pay for purchases using either traditional payment methods such as a bank card or payment solutions specific to these devices (text messages, electronic wallets, etc.). This second feature of mobile payment is nothing more than an extension of e-commerce to devices other than the traditional PC.

The third type of use emerging and is, in some ways, bridging the gap between remote payment and face-to-face payment. Smartphones and tablets are now being used in some shops to improve both the customer relationship and purchase process by not having to pay at the till, as we are seeing in Apple Stores and Starbucks coffee shops in the United States, for example.

Mobile commerce or Nomadic and multi-channel commerce?

In the previous examples, commercial transactions are carried out using a mobile device and are therefore m-commerce, meaning mobile commerce. However, is it really “mobile” commerce when, unlike making a telephone conversation, it is difficult to make a purchase whilst moving around. In fact, the notion of nomadic commerce, or n-commerce, would be more appropriate as you stop to make a purchase while you are on the move, for example at a station, in a café or restaurant, at home or in a traditional shop.
The range of possibilities opened up by the touch-sensitive interfaces, interactivity and user-friendliness of smartphones and tablets is growing all the time. For example, text messages with embedded geo-location, alerts containing a link to a video featuring a special offer and money-off coupons in the form of a 2D barcode or QR code, mean that interactions between brand and consumer can be increased tenfold. Therefore, in future, these multi-purpose and nomadic devices might well become a permanent feature in physical outlets, replacing chip and pin terminals.

Traditional or alternative payment solutions?

There is however, a “sizeable” difference between browsing and using a smartphone or tablet, namely the dimensions of the screen. This difference has an impact on the choice of payment solutions because although you can easily pay by bank card using a tablet, entering the card number on a mobile phone may prove a lot more difficult.
As a result, a number of initiatives have come about to simplify payments on mobile phones, and some merchants have created purchasing profiles whereby the customer pre-registers his or her address and bank card details on the merchant’s website. A simple login/password combination is all it takes to pay using your mobile phone, exclusively at the shop in question.

Over the past two years, e-wallets (electronic wallets) have emerged. These are specifically designed for mobile phone payments such as PayPal Mobile, Google Wallet, Kwixo, Buyster, etc. The advantage of these solutions is that customers can use them in several shops.

Towards 2-click payment, regardless of the sales channel?

The introduction of these alternative payment solutions is currently being considered. On the one hand, the commissions charged per transaction are more expensive than those for card payments. Not to mention the fact that these new solutions would be added to the other payment methods offered across other distribution channels, making them more complicated to manage (consolidation of each payment system, bank reconciliation, etc.). On the other hand, introducing them may attract new customers attracted to innovation and the user experience.

In fact, there is no comprehensive answer, with everything depending on the merchant’s business model and the growth potential this new sales channel represents. Regarding luxury brands, impulse buying through the use of a mobile device will not represent the bulk of their turnover. However, mobiles may be a way of attracting customers into the high street stores. In this case, a purchasing profile tailored to both traditional and mobile “surfing” may be enough, but not for a merchant selling digital content (music, games, etc.). These are keen to promote the free flow of purchases (often on impulse), the product sold is suitable and the target consumer is already inclined towards using alternative payment methods, such as premium text messages and prepaid cards.
One of the good things about the buzz surrounding new payment solutions (most of which are based on payment cards) is that it has highlighted a major shift in general commerce, in which consumer confidence in electronic commerce is growing. Ultimately, this will inevitably lead to the user experience being treated as a priority in order to promote 2-click payment, regardless of the sales channel.

Julian Wallis is Country Manager of Ogone UK

Ogone will be at The Retail Business Technology Expo at Earls Court London on 13th and 14th of March. Their stand number is 121.