Ready to leave your wallet at home and use your mobile phone to pay for everything? Most of us still need the reassurance of cash and cards for now. However, there is little doubt that mobile payments will take off.
Consumers own more smart devices than ever before and PC sales have been in steady decline for years. Recent research from Gartner predicts that tablet sales alone will overtake PC sales in 2015, when there will be nearly 321 million tablets shipped, versus 317 million PCs. As consumers use smart devices for work and play, inevitably they will use them to pay too. Big businesses – banks, retailers and technology providers – as well as a host of start-up players are looking to grab a slice of this frontier economy that is set to explode.
While everybody can agree that mobile payments will be big, defining what mobile payments are and what the market will look like is much more difficult.
Are mobile payments about tapping your mobile phone on a terminal at the supermarket like you do with a debit card? Is it when you send a friend money via text message? What about just buying something using an app on your phone? What’s the difference between all these things?
In an effort to clarify, I’ve outlined what I believe is the best way to break down the different categories of mobile payments.
Mobile-point-of-sale (mPOS) allows merchants and business, both large and small, to accept card payments using a smart phone or tablet, rather than a traditional ‘fixed’ point-of-sale (POS) terminal. There are a number of ways that MPOS can be enabled, but most often it’s via a ‘plug-in’ card reader or a “sled” device that the mobile phone fits into. This is then combined with a mobile app that often have interfaces resembling traditional cash registers.
Proximity mobile payments
Probably the most hyped category of mobile payments, proximity payments let consumers use their mobile phone to pay at a venue – in-store, at a train station or even directly from advertising. The most well-known type is Near Field Communication (NFC) payments which allow consumers to tap their NFC-enabled smart device on a compliant terminal to make a purchase.
Other examples of proximity payments include QR-codes, where the user scans a QR code using the phone’s camera to make a transaction, and apps, where the user checks in and orders goods or services using an app, which is then reconciled at check-out using either a special code or some form of ID.
Remote mobile payments
This category is a bit more complex and involves two different forms of remote payments:
- Peer to Peer: This is where users are able to send money from person-to-person or person-to-business simply using a mobile phone number as a proxy, without the need to disclose their sort code and account number. The transaction usually takes place via a text, but can also be performed within a payment app.
- Mobile app/website: This type of mobile payment can be split into the following subsets:
- Card – when a user purchases an item in an app or via a mobile browser using their existing payment card
- Wallet – the same as above except the user uses a wallet which already has their payment details stored
- Carrier billing – most frequently used during digital content purchases. The user re-charges a purchase – a film or a game let’s say – to their mobile phone bill or TV subscription.
While this list is by no means exhaustive, it does cover the most common forms of mobile payments in use today.
I hope this post has been helpful to those looking to navigate the mobile payments maze and I welcome your thoughts and opinions on this exciting growth market.