Forget your coins and notes, simply tap, swipe and make payments through your mobile phones or perhaps with your smart watch or Google Glass! Welcome to the era of Money 3. 0, which is likely to render all physical coins and notes obsolete and queues at the super markets the thing of past.
Mobile payment platforms have already taken the digital world by storm with over $1 billion transactions been already made through mobile phone between 2012 and 2013. The industry watchers maintain mobile payments could reach a whopping $58 billion in next five years, with this relatively new technology setting the stage for new age of e-cash.
Before going into the nitty-gritty of the technology, let’s firs try to deconstruct the concept of mobile payment. What exactly constitutes a “mobile payment”? As its name suggests, a mobile payment takes place when a payment transaction is carried out using a mobile, Internet-connected device at any point of sale including stores.
Mobile payments also support the mobile commerce or application-powered e-commerce, Amazon’s iPhone app for example. These applications of a payment company allow you to link the payment service to your bank account or credit card. The app then becomes your digital wallet allowing you to pay for your wares.
Technologies Governing Mobile Payment
Several fast-evolving technologies are facilitating this transition from cash/ card payments to mobile payment. If magnetic strip is for plastic credit card payments, near-field communication (NFC) is for mobile payments.
NFC is the name for the contactless, Wi-Fi-lite technology that uses very low power in your smartphones. Based on adio-frequency identification (RFID) technology, NFC helps transfer small amounts of data between two devices in close proximity (as close as a few centimeters.) The technology helps make payments by simply identifying your account and connecting your phone to it. Thus if you are using an NFC enabled Android phone, all you need to do is: tap your phone at the checking out counter to make payments.
The NFC technology is appealing for the marketers too. NFC chips residing inside your smart phone also allow for the transmission of banking and interactive payment data when placed near readers. The technology can be used by the marketers to track your shopping habits and even your daily commute routes.
Then there are a host of card reader technologies that turn your smartphone into a debit/credit card itself. When plugged into a smartphone, the card reader devices allow you make card payments straight away. The customers’ signature appears on the right on the mobile screen and receipts can be mailed to them for safekeeping through such services as Payleven, iZettle.
Then there is PayPal’s Beacon and Apple’s iBeacon technology that support battery-friendly Bluetooth connections. Using these connections, messages can be transmitted on to the smartphone or any connected mobile device. This technology is designed to benefit both the buyers and the sellers. It opens up a unique communication gateway between buyers and sellers. Once a customer is inside the threshold of a store, the retailers can use Beacon supported hardware to communicate product information, promotional offers and deals to the customers. For the buyers, this technology helps to complete the checkout process real fast with a truly contactless payments system. For now, a registered picture of the customers is referred to for purchase security. But eventually unique biometric information are likely to be used to enable these kinds of mobile payments.
Mobile Payments—What to Expect
Mobile transaction volume is growing so dramatically. There are a lot of reasons, why it is bound to thrive even further in few year’s time. Convenience is one of the biggest factor that would drive its growth in the upcoming years, the experts believe. Armed with the right set of apps and tools, such as card readers and scannable QR codes a smartphone can be a more convenient yet more powerful payment tool than plastic money. Customers are becoming increasingly familiar with these technologies and becoming more confident in opting for mobile payment options to make offline and online purchases.
Although, overall usage is still low, it is expected to gain momentum in the upcoming days.
Just like any other emerging technologies, it is the issue of security loopholes that are holding back the customers from embracing mobile payment in a big way. However, advanced biometrics could be a possible solution for overcoming the security gaps. A host of security gaps could be addressed by enhancing the systems of verification at the point of purchase. Separate verification system should be introduced for larger purchases. Thus while a finger tap is sufficient for small purchases, more stringent verifications including retinal scan or PIN identification can be used for the large purchases.