Experts have long been predicting that the smartphone will become the electronic purse and finally the technical requirements such as new-generation SIM cards and Near Field Communication (NFC) are ready.
Fact is that more and more consumers are interested in paying with their smartphone, especially young users, aged between 16 and 24 years, find mobile payment very attractive and use it intensively. Besides, the development of LTE networks and its associated offerings increases the interest in m-payment enormously.
Whether we are talking about coupons, product information, mobile payment or loyalty points, mobile phones influence customer behavior prior, during and even after the purchase. New technical developments offer brands and commerce huge sales potential, customer loyalty opportunities and the associated crucial customer acceptance. Experience has shown that consumers want access to coupons anytime and anywhere on their preferred channel. Then vendors can take advantage of couponing to their own benefit - whereby the technology plays actually just a secondary role.
Mobile solutions are changing markets and user behavior more and more: Just think about what you would do when you see an interesting product on Sundays or late at night in a shopping window? You pull out your smartphone, scan the QR code from the product or display, and conveniently and safely pay via app. Mobile payments is just making life easier and more comfortable. Not to mention that the multi-channel trade opens new sales channels and new customer groups for goods suppliers.
Since the wallet and its substantial content is our constant companion, just like our cell phone, it is actually no-brainer why we shouldn’t connect the annoying purse with our mobile device? A digital wallet is safe, wireless and uncomplicated.
Instead of just looking around for products on the mobile Web, in the future the purchasing and payment process will take place the mobile way, too. The emerging trend of easy and cashless payments with mobile devices opens up significant opportunities for retailers.
In developed markets, the first mobile payment solutions via NFC have been launched, which are, however, still in search of sound business models. Besides, customers still need to be convinced that they can pay as safely with their cell phone as with their credit card or cash. In the broad market, payment via NFC will probably only pick up in the next three years, but the pointer is definitely on growth:
According to current forecasts, revenue in m-commerce shall even grow faster than in e-commerce. By 2015, an increase of nearly 40 percent is predicted for m-payment usage. And according to forecasts of the research firm Gartner, transactions via Near Field Communication (NFC), will remain rare till 2015, but grow strongly in 2016. Companies like Google, Visa and PayPal have already introduced their m-wallet solutions and Apple could expand its Passbook App soon.
Small chips with a big impact
m-payment is all about small chips. With the so-called Near Field Communication (NFC) a direct exchange of data between two devices is possible - wireless and only through the new radio technology - based on which a comprehensive architecture can be build that ultimately results in an m-wallet app format. In doing so, there is almost no limit regarding the diversity of features, thus, making the real purse look like a thing of the past. The customer once again moves more into the spotlight and can benefit from various bonuses and loyalty programs. Mobile coupons and exclusive offers can be displayed accordingly by the app, opening expanded opportunities to marketers that can play out individualized marketing measures’ strengths.
Security a top priority
Combined with the corresponding features, the mobile wallet of the future will be more than just a purse. However, sophisticated security mechanisms should always be top priority in m-payment solutions. Especially telcos need to provide additional options such as an authentication key that works much like the fingerprint reader for newer notebooks that could ensure the critical part of the communication path via NFC.
The telecommunications provider O2 demonstrates its pioneering spirit with the launch of a digital wallet and Google has already put the cat among the pigeons with its wallet solution that caused a stir last year. Whether iPhone, Blackberry or Android smartphone - shopping online or in retail stores can already be handled via NFC and even the transfer to other mobile numbers is possible.
The coffee shop chain Starbucks recently enabled payment via app and barcode scanner or with loyalty cards as well. The existing app will be amended by an appropriate function.
The chicken and egg problem
The question that has to be raised is where the central payment processor will be placed in the future: In the SIM card, in the software of the operating system, or in the smartphone itself? This crucial question determines who controls the value chain and will get the biggest piece of the pie. If it is the SIM card, then the telecommunications companies will become the "master of the mobile payment", in the other cases it will be an operating system provider – in the first place Google - or a hardware provider.
For e-payment providers and payment institutions it won‘t make much of a difference, as they are only interested in the relevant infrastructure and therefore cooperate with all field trials. They are aware of the fact that transactions using NFC (Near Field Communications) will only work if the phone is not only NFC-capable, but the retail business installs NFC-enabled readers nationwide, too. Due to these problems, the shift to mobile payments at the point of sale will not take place all at once, but gradually.
By Daniela La Marca