The Four Pillars of Mobile Payments

An Efficient Mobile Payments System

For financial institutions tasked with defining mobile payments strategies, it is best to consider the recipients of the payments. Mobile payments go far beyond just the point-of-sale (POS) and strategies need to consider other value-added services, such as top-ups, mobile cheque deposit, person-to-person (P2P) payments, disbursements, bill payments and remittances. The building blocks of mobile payments can be thought of in terms of four pillars:

  • Paying self: Using a mobile device to make transfers and to deposit cheques into a personal account, via mobile deposit and funds transfer capabilities.
  • Paying other people: Making P2P payments or remittances (domestic or international) to individuals and groups from a mobile device; this includes disbursements from businesses or governments to individuals.
  • Paying billers: Making payments to a biller either through a financial institution’s (FI) mobile app or a biller’s mobile app. Functionality may include e-bill presentment and payment capabilities such as using the mobile device camera to capture an image of a bill to automate payee set up.
  • Paying merchants/retailers: Making purchases either in a store via mobile proximity payments (near field communication (NFC)), quick response (QR) code, cloud or online via apps and mobile websites.

Growing Consumer Demand for Mobile Banking Services

A new generation of digital-banking customers is rising across Asia, who want full digital access to the latest offerings and a more personalised set of products and services. According to McKinsey, the Asia-Pacific region, including China – which currently accounts for the largest share of payment revenues (40%) – will continue to be the engine of growth for mobile payments.

Given that consumers are constantly on the move, they increasingly want to make mobile payments wherever the option is available to them, as opposed to using more traditional payment methods. It is crucial that FIs, payment technology developers and retailers keep up with consumer demand and innovate to embrace the growing popularity of mobile payments.

As the Asia market matures, non-bank competitors such as Alibaba/Alipay, Apple, Samsung, PayPal and others will leverage mobile technology – along with their own existing customer and supply chain relationships – to disintermediate FIs for mobile payment services. In markets like Australia, Canada and Spain, some FIs are taking the threat from outside players seriously. For example, ANZ, Commonwealth Bank of Australia (CBA) and Caxia Bank all have invested in comprehensive mobile offerings across various payment use cases. It would be wise for other banks around the world to leverage best practices from these ones.

As compared to other countries in the region, Singapore is an advanced market for mobile banking. Banking penetration and sophistication is high in the city state, moving it closer to the long-vaunted goal of being a cashless society. There is a big push by banks to continue rolling out new services to make mobile banking more convenient. For instance, banks are introducing new mobile services that are able to marry mobile banking, payment and shopping functions.

Banks have an advantage over non-bank competitors as the mobile banking and payments user experiences converge. By pushing forward with their mobile payment strategies to establish themselves as the preferred provider of mobile payments, banks will be able to reap the rewards of high member retention and compelling returns on investment. In doing so, they will be better able to compete with the ever-growing number of non-traditional players – and will also better position their organisations to win in mobile proximity payments as those services become standardised and more commercially viable in the future.

How to Build Strong Mobile Payments Pillars

Capabilities related to POS payments should be a focus area – including capabilities such as merchant-funded rewards, loyalty programme functionality, payment-related alerts and the ability to manage card accounts during international travel – but not until later. What is important now is to consider and leverage the POS user experience in the design for the mobile banking experience and other transaction use cases, as this will increase the likelihood of consumers seamlessly transitioning from mobile banking to mobile proximity payments as it becomes more common.

Successful implementation of a full complement of mobile payment capabilities requires focus and commitment. To be most effective requires establishing a company-wide mobile channel management discipline that is assigned to an owner from the executive management team and includes stakeholders. This will help formulate strategy and implement tactics, engage in industry forums to keep pace with the development of mobile payments, train and develop staff, and put monitoring and management tools in place, inclusive of reporting dashboards.

Support the Four Pillars

Consumers, financial services providers and retailers clearly see the value and the opportunity in mobile payments. Consumers are increasingly using their mobile device as the primary point of interaction with many aspects of their financial lives, from banking to bill payments to retail purchases.

Consumers will continue to increase and customise their usage of mobile payments of all types, choosing the apps and payment methods that fit their day-to-day buying habits and giving preference to the options that deliver an exceptional experience.

FIs are well-positioned to benefit from mobile payments by leveraging existing advantages and assets to encourage members to conduct many types of mobile payments today and retain their business for a lifetime. By focusing now on delivering solutions for the way customers are already using mobile payments, they can benefit from increased transactions and greater customer loyalty while creating the potential to attract new members as mobile payments become more widespread.


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