A Brief History of Mobile Payments
In 1997, Coca Cola launched a project with a small number of vending machines in Helsinki that allowed customers to pay for their drink via text message. Later that year, Merita Bank used text messaging for bank account transactions. That was 10 years before the iPhone was introduced in 2007, when the world of how we communicate began to seriously change. During those 10 years a lot of revolutionary things happened – the introduction of NFC (Near Field Communication), PayPal Mobile, and buying everyday items like movie tickets and pizza from our mobile phones.
In more recent years, we’ve seen the launch of dedicated mobile payment systems. Google Wallet, Passbook, Squared Payments, and many other solutions have popped up. In 2013, mobile payments at POS tripled from the previous year (Federal Reserve, 2014) 17% of all smartphone users reported using mobile payments during the 12 month period, with the heaviest usage among Millennials.
Growth with mobile payments as been slow for various reasons, but the most frequently reported reason is security. People are largely concerned with their information being stolen, which is totally understandable. So how does Apple address this issue?
How Apple Pay Works
It uses a form of short-range wireless communications (NFC) for the payment transactions. When you put your iPhone 6 near an NFC-enabled POS system then scan of your thumbprint, the transaction is completed. This transaction is using an encryption to keep your personal and banking information safe, so that it cannot be hacked through the wireless exchange. Using NFC, two devices that are near each other can have a fast exchange of information that is secure.
What is really interesting about this is that Samsung and a few other smartphone producers have introduced similar systems in the past. However, these other mobile payments did not catch on.
The Apple Effect
Even though a larger percentage of the smartphone market in the US is owned by Android devices, Apple has this magical effect on consumers. Apple Pay is technically not a technology revolution, but the world audience is reacting as if it is a brand new concept. This company forces competitors to innovate and evolve their business models in order to grow.
Will Apple Pay be a game changer for Mobile Payments? I think so.
Of late, you cannot visit a tech blog without reading the words mobile payments, mobile commerce or mobile wallet. Mobile payments are blowing up and revolutionizing the way consumers pay for goods and services. But what does it all mean? What kind of technology are we talking about here?
As a rule of thumb mobile payments is the umbrella statement referring to 3 types of payment technologies performed through a mobile device: mCommerce, mPayment and mWallets. Each of these has its own unique functionalities and offers a variety of benefits to the user.
mCommerce refers to payments made via mobile internet browser. For example, an iPhone owner opens up his or her mobile web browser (i.e. Safari) and goes to Amazon.com. On Amazon, they add a pair of shoes to their basket and then pay by entering their credit card and shipping information submits and receives a receipt via email. The user has just completed a mCommerce transaction.
mPayments refers to payments made through contactless mobile app technology, such as NFC (near-field communication). In this case, the consumer’s credit card information is stored in a retailer’s app and the user simply enters a pin or password prior to purchase, taps their phone to the NFC POSi and their information is sent for authentication.
mWallets refers to technologies that aim at replacing your entire wallet by storing your credit card and banking information virtually. An mWallet is an app that stores all of your credit cards, loyalty programs and offers and payment is made by “swiping” (NFC, click-to-pay, etc) your smartphone at check out. Popular mWallet applications include Google Wallet and Pay Pal Here.
As adoption of mobile payments continues to increase, the lines between the types of payments will continue to blur. Regardless of technology type, it is more important than ever for retailers to adopt stay on top of trends and consider a mobile strategy that incorporates mobile payments. Because of the convenience that mobile payments offer to customers, mobile payments have infinite revenue growing potential. In the coming months, expect to see an explosion in the popularity and success of this emerging technology.
have been growing in popularity, but I was surprised to learn that a report released by Juniper Research is predicting that over 300 million consumers will use them by the year 2014. “Mobile Coupons & NFC Smart Posters:Strategies, Applications and Forecasts 2009-2014
” predicts that electronic coupons will be the most popular way for buyers to save money on purchases.
The increase in mobile coupon use is directly linked to the increasing consumer demand for smart phones. As more buyers have access to mobile technology, they will be taking advantage of various apps available, including ones that provide opportunities to save on purchases.
I was especially interested to learn that mobile coupons are redeemed
at a much higher rate than the traditional paper version. Approximately five to seven percent of electronic offers are presented to a retailer, as opposed to two percent of paper coupons.
These electronic coupons can help to encourage consumer visits to a brick and mortar location, giving retailers the opportunity to show the customer what the location has to offer. Once the buyer is in the store, it will not only boost sales for the item being promoted, but will also increase sales for other products on offer.
This sounds like a win-win situation for retailers. Since mobile coupons are easy to produce and are the “green” way to save, it may even boost sales from environmentally conscious buyers. It is no wonder that they are poised for such tremendous growth.
What exactly is NFC? NFC, or Near Field Communication, is the technology that allows certain devices to communicate with each other through radio communication by being in the same proximity of each other, usually no more than a few centimeters. This is based on the same technology as RFID (Radio Frequency Identification). Uses for this includes payments and ticketing, point of sale couponing, checking in with location based social media networks such as Foursquare, loyalty programs, smart posters, cards, and stickers, and many more.
To a lot of people, it could be the future, but to many others, it’s pretty scary. The thought of transmitting information through your phone just by walking by an external device would make many people nervous.
McDonald’s restaurants have already rolled out NFC in Japan, allowing customers to download coupons, place orders, redeem coupons, and pay for their order from mobile devices. Soon you’ll be able to get on a bus and swipe your phone next to a sensor that will read your account and automatically pay for your fare. In Paris, the Centre Pompidou museum will use NFC technology to allow visitors to learn more about artists and their work by waving their phone near exhibits. NFC also can allow users to share photos and videos just by touching their devices together.
Google, Apple and Amazon are all currently exploring opportunities using NFC. The technology is still very rare in the US but has become pretty common in parts of Asia and Europe, and as smartphone adoption continues to increase in the states, we will see an increase in NFC usage over the coming years.