In the history of mobile payments, it seems that much has been promised, many technologies and innovations have appeared, but a universal payment system still seems far, far away. Yes we have PayPal (former member of the trade federation with EBay) for online payments, but the in-store digital payment experience is complicated and patchy.
The reality for most people (if we ignore digital currencies such as Bitcoin) is that any digital transaction will be linked to a bank account. A payment instrument is required to take funds from the account – in advance to load up another token, an immediate debit, or a credit for the account holder and a delay in taking the funds.
Plastic cards issued by the banking empires provide debit and credit instruments, and increasingly debit cards are contactless EMV cards (Europay, MasterCard, Visa). Pre-loaded tokens are also typically plastic cards, not generally issued by a bank, but by a rebel alliance of non-financial organisations. These work well in closed systems, for example where employees use them for cashless payments inside their organisation, say in vending machines or staff canteens, or public closed systems such as transport ticketing and payments, like the Oyster card.
Plastic cards have long been the payment instrument of choice, but perhaps these are not the final devices we should be looking for, and we should move along to something new?
Once mobile phones became one of the three universally carried items (keys, wallet/purse, phone), there was an opportunity for mobile operators to step in. But, despite some regional successes in mobile payments and transfers (e.g. Vodafone’s M-Pesa), simple to make payments over SMS and the potential for NFC (near field communication – another contactless mechanism), many mobile operator options still jar-jar. The problem is not really one of technology, but driving universal retailer and user adoption.
However, the next wave of mobile payment solutions have already dropped out of hyperspace – Google’s Android Pay, Apple Pay and Samsung Pay – and unlike operators these span multiple geographies, as well as different devices.
They also bring something else that will offset any lingering disturbing lack of faith in mobile payments – user desire. This emanates not only from the shiny devices which have style appeal beyond their functionality, but also from their ability to deliver a market and appetite for applications and media content. Users are comfortable with spending their republic dataries (or local equivalent economic currency units) on buying apps and in-app purchases.
However, while this familiarity has led to much needed confidence in the security of making payments, the transition into mobile payments for other goods in physical locations has not been entirely seamless. Thus far, Google, despite being first with both NFC-phones and its Wallet in 2011, started off with a pretty poor user experience and has not been sufficiently aggressive at promoting its technology – this is critical for widespread adoption as any payment mechanism has to be available whenever a user might want the convenience of using it.
Despite being a bit later adding a payment mechanism, Apple has had a Wallet (originally badly named Passbook) in place since 2012. Recognition that wallets hold receipts, tickets and other items of value apart from payment instruments is important to user acceptance, but so too is numbers and with the capability for contactless payment alongside the wallet integrated into phones from the iPhone 6 range of models onwards, Apple looks set to ensure the other players will get a bad feeling.
It might seem that businesses looking to receive mobile payments still have many options, but Apple has put a lot of effort into security, and critically privacy, for purchasers. So much so that banks are very enthusiastic, in some cases paying Apple for transactions due to the reduction in the cost to the bank of anti-fraud provisions. This appeal with the banks is positive for user adoption as well, and will make it a more interesting proposition for retailers.
Google is sure to fight back now that its Wallet’s second iteration, Android Pay has started to roll out, and Samsung picked up some interesting technology (Magnetic Secure Transmission – MST) when it acquired LoopPay, which massively improves its potential retail reach. MST means that phones with Samsung Pay will work on any payment terminal that accepts regular swiped contactless cards, as well as NFC.
Ensuring that each payment system is broadly accepted is also a problem. At this stage of the market (r)evolution, this broad acceptance is more about getting retailers to have the right equipment in place for NFC payments. However, what would fragment the market would be to have the old Visa/Mastercard, American Express, Diners Club battles – with Diners Club losing out big time, and American Express only being accepted in certain places.
It is in the best interests of the Republic and the Federation to ensure that there is fair play for pay – there is enough in the way of transactions out there for the main battle to still be around the overall device and its capabilities, rather than solely around the means of retail transaction payment.
However, as well as having the contactless technology in place in the retailer and the hands of the consumers via their phones, the banks need to be part of the rebel alliances. In this regard, Samsung is lagging Google but Apple has come up very fast with its approach to privacy. 1983 was a long time ago when the first commercial mobile phone (Motorola DynaTAC 8000X) and Return of The Jedi appeared, but it now looks like mobile payments will finally become a force to be reckoned with.