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Mobile Payments: A Look to the Future

We take a look at the various mobile commerce technologies developed to make paying easier, including contactless payments and more! Read on to see more!

Buying stuff with your smartphone has been possible for a while now but recently all analytics show it’s really starting to take off. However, there remains some concerns regarding the security and complexity of mobile payment systems. The companies involved in this area are fighting tooth and nail to purify its image and present the concept of paying with your mobile as the future of commerce.

In a survey of 2,000 UK consumers carried out by mobile payments firm Zapp, it was found that 17% had previously made a mobile transaction, however 60% of these transactions were merely simple bank transfers. 50% of respondents said that security was the biggest issue with the technology. A similar survey conducted by YouGov found that fewer than 25% of consumers would use their smartphone to make payments even if they had the relevant app, with 80% citing security concerns as the reason for this.

Yet, despite this, the feeling that we are on the verge of a mobile payment revolution is everywhere. There has been a lot of press about it over the last year or so, and there are plenty of start-up companies who are claiming to be the ‘next big thing’.

Two dominant technologies lead the race to facilitate mobile transactions – NFC (Near Field Communication) and QR (Quick Response) codes. QR codes have the advantage of not requiring any specialised internal components – they work by generating a 3D barcode on the screen which is scanned by another device’s camera, retrieving the user’s payment details and completing the transaction. You have most likely seen QR codes out and about in shops, on bus stops and in magazines. In fact, we recently put together QR Codes for our NHS Breastfeeding App. Just thought we’d drop that in there.

NFC on the other hand requires an internal component in your phone quite similar to Bluetooth, which is of course now standard amongst all new phones and has been for many years. For the process to work, the two devices (the device making the payment and the device receiving the payment) need to be within range of each other incorporating a secure element for storing sensitive data. Most new android phones now come with NFC capabilities, however the Apple iPhone does not, which creates a large stumbling block to widespread adoption of the technology. You get the feeling that Apple, with their minimalist approach to manufacture, will not include NFC in their product until the technology gains more popularity. And this will be hard to achieve in itself without the consumer base of the iPhone, presenting NFC with a sort of ‘Catch-22’ situation (great book though).

For precisely this reason, Starbucks chose to forgo NFC technology (at least for the time being) when creating their mobile payment app, choosing instead to utilise on-screen barcodes. Initially launched back in January 2011, it has been reported that 10% of Starbucks transactions in the US are made through mobile devices, illustrating how successful their system has been. The app works by ‘digitalising’ the existing gift card scheme, allowing customers to top up their card and spend in store. The app incorporates a loyalty rewards scheme and also features an auto-top up feature for when your balance is running low. Starbucks are widely regarded as the market leader in mobile gift cards, and have set the benchmark for competitors to work from.

In terms of mobile payments which link to your bank account, and therefore truly offering a ‘mobile wallet’ experience, there is no clear market leader at the moment, with lots of companies vying for that position. PayPal have recently announced the ‘Beacon’  to be used by retailers which accompanies their new mobile app for consumers. The Beacon utilises BLE (Bluetooth Low Energy) technology in order to offer a completely ‘hands-free’ experience. Users will ‘check-in’ to shops, which will bring up their photo on the point-of-sale system, with the sale only requiring a verbal communication. This means that consumers won’t even need to take their phone out of their pocket to complete a transaction. Personally, I believe that this technology will be highly effective when used in a restaurant setting – the staff will have a list of all the diners who have ‘checked-in’ along with their photos, being able to easily process payment for their meals without the added hassle of the customer asking for the bill, the bill being brought over, asking for the card machine… you get the idea.

UK-based Zapp are getting ready to launch their mobile payments app in the summer of 2014, and aim to put the banks in the middle of the process rather than ‘sidestep’ them. The app will utilise existing mobile banking apps from the big UK banks which will naturally add an extra layer of security, offering a new way to complete transactions both in-store and online. A code will be sent to the customer’s smartphone when they are completing a transaction, and Zapp claim that payments can be completed within 12 seconds using their technology. They have partnered with Worldpay and WH Smith, Lidl, Superdrug and McDonald’s have all signed up to the scheme. Time will tell whether Zapp can ride the mobile payments wave successfully, but they certainly have an impressive backing from big companies when you consider that they have not yet even released their product to the mass market, suggests they recruited some ruthless new business guys and gals.

Portable card readers which connect to smartphones are another product on the market, and they are gathering steam. Attempting to fuse the old with the new, the products allow payments to be taken securely using a credit or debit card with chip and pin and the vendor’s smartphone, without the need for a large card reader such as those found in shops. Simon Mott, a 49 year old Big Issue vendor from London has shown great entrepreneurial spirit, utilising this technology to offer card payment for his magazines with the portable card reader from Swedish company iZettle. He says that he expects to sell around four copies of the magazine every week using his card reader, and it is refreshing story to read about.

As you can see, the road ahead for mobile payments is not yet clear. There are many competing technologies and it seems this is precisely what is holding the movement back. Once a dominant system emerges, which is proven to be safe, secure and simple to use, we will certainly see the mobile payment revolution gather pace. But, until then, the average consumer will most likely be getting progressively more confused. If you’d like mobile responsive web design for your current web platform, give us a call.