How businesses and consumers will pay for products or services in future has spawned numerous debates. In particular, the topic of mobile payments has frequently been the focus of discussions about how money will be exchanged in years to come. Today, this complex subject makes its way into daily conversations and has become a strong competitor in the payments space for companies and, perhaps eventually, their treasury departments.
Mobile payments have tended to arouse strong feelings, both for and against. The ever-important question remains: does the future belong to near field communication (NFC) or the cloud? Is there room for both? And are people actually ready to use something other than plastic when paying? Many questions still remain unanswered as both consumers and merchants continue to test the water.
A proper understanding of mobile payments requires a review the history of mobile banking, a concept which failed to gain much market interest back at inception. In 2001, mobile banking was offered by some companies through a range of small platform providers. The client base was, generally speaking, highly educated, tech savvy and relatively affluent. Firms in the mobile payments space rolled out a wireless application protocol (WAP) solution that was available for BlackBerry and the Palm Treo – the only devices that could support Web browsing from your phone at that time. If the past is an indicator of the future, forecasters might have been able to predict that both parents, Research In Motion (RIM) and Palm would later struggle to achieve meaningful market share. It would be a further six more years before mobile banking began to resurface as a viable option, after the failure of SimPay and other such initiatives.
Advantages of the Cloud
In 2013 technology is finally mature enough along the distribution chain for mobile payments to achieve consumer traction and smartphone usage is fast approaching saturation point. Alternative payment networks such Square, iZettle and Dwolla are significantly contributing to the market space, and both players make it easier for consumers and merchants to exchange currency.
Square is ahead of the game with its Pay with Square app, while Apple and Lemon have both launched similar mobile wallet products. Other options include Paydiant (cloud), Isis (NFC), Google Wallet (NFC), the Canadian Imperial Bank of Commerce (CIBC) and Rogers relationship (NFC), as well as there being daily noise on new initiatives from carriers and card issuers.
Consumers have never been more engaged with their mobile devices than they are today, and the trend is only set to increase. Mobile devices have become vital to the way we communicate. So it’s easy to understand why this technology could also serve as our lifeline to our money.
Mobile payments will shift to the cloud, rather than taking the NFC route, for several reasons:
- Ease of deployment and distribution.
- Time to market.
- Consumption and adoption.
- Unlimited by hardware in most cases.
NFC, on the other hand, requires consumers and merchants to update their device, or attach a sticker to it, which acts as a detractor and thus re-enhances the common notion that simplicity will override complexity every time.
With mobile payments applications such as Square or Dwolla, both of them cloud-based payment providers, directing consumers to merchants supporting their method of payment, users are provided with all the necessary information to make mobile payments a simple, beneficial alternative to traditional methods.
Benefits for SMEs and Corporates
Another positive to making payments through mobile applications is through electronic receipts (e-receipts). Business persons and consumers will no longer need to stuff their wallets with paper receipts, as all the relevant purchase information will be stored on their mobile. These receipts could also help the corporate treasury. Along with this advantage, these mobile payment offerings permit small and medium-sized enterprises (SMEs) to accept card-based payments without high interchange fees and investments in merchant services and hardware, thus giving SMEs a more equal footing against their competitors.
There is nothing significantly wrong with NFC, but if we wait for every merchant to upgrade their hardware and software, and for every consumer to update their device, it could be years before it becomes a relevant and predominant method of payment. By contrast, cloud-based payments could be as easy as software updates for businesses, merchants and consumers.
Although Apple was one of the first to offer payments on devices, others are following suit. Merchants are encouraging checkout processes to occur on the spot, with an increasing implementation of e-mailed receipts. Department stores will begin to accept wallet payments from providers such as Google and automated teller machine (ATM) companies are announcing new technology that allows cash withdrawals using a mobile phone and 2D barcode. Consumers will soon be able to use their card at vending machines too.
It is clear to see that the market is evolving and maturing rapidly, behaviours are changing and technology is at the forefront of both. The issue we face, however, is who, or what, survives? Will there be a single form of payment or is it possible to support both the cloud and NFC? Who will be the more dominant: the consumer or the merchant? Will the carrier be invited to take a leading seat at the table? Many questions surround these issues and as yet there are no easy answers. As technology continues to evolve, the future of mobile payments will become clearer.
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