Time to Utilize Mobile Phones in Payment Industry
Since the beginning of electronic payments, merchants and banks were always thriving to find more innovative and easier to use technologies to enable fast transaction processing and support various business needs.
While the requirements vary from one business to another, many alternative payment solutions entered the market recently such as Mobile POS, Smart or cloud POS and NFC. Focusing on simplifying transaction processing while leveraging from one-touch payment technologies to process micro payments, many of such initiatives failed due to solution flaws or improper marketing tactics. However, few successful cases emerged such as MasterCard’s Paypass or London public transportation (oyster) which in our books is the best functional NFC solution to date.
But what is next? Out of all the new devices and solutions, which will receive the better appreciation of customers and merchants?
Here we review the recent innovations in the digital and payment industry as to predict the trend:
Increased Smartphone Penetration
According to Strategy Analytics, over 1 billion smartphones were sold globally in 2013 alone. This figure is expected to exceed 2.4 billion by the end of 2015 (over 3 billion accumulated). Also, considering emerging markets such as Middle East, where the smartphone penetration is now over 70% in most states, pushing the payment industry to utilize this great potential.
While isolated solutions by some merchants have emerged utilizing mobile devices as wallet (such as Starbucks wallet), still non have been utilized at mass level due to limited support of contactless enabled POS terminals and lack of centralized solutions. Currently mobile devices are only performing limited micro-payments such as parking payments or public transport which has much room to expand.
Starting last year, top mobile manufacturers started developing their flagship devices with secure biometric identification mechanisms and secure memory element getting closer to payment industry standards and addressing most security concerns associated with smartphones. This opens the path for more innovative total payment solutions not only enabling customers to use smartphones as their wallet but take advantage of other features such as e-receipt and QR codes.
New Contactless Technologies
Talking about contactless, NFC has been around for years and now many mobile devices also have this feature enabled. But there were many drawbacks to this technology in the payment sector. Most POS terminals lack this feature and renewing them will take years to complete even in the developed countries. Other wallet approaches such as Apple Pay also relies on a limited number of merchants making it years behind a popular solution.
Bringing a twist to this industry is a new company called LoopPay which was acquired by Samsung Electronics this winter utilizing an innovative technology. MST as it is called, allows a small device such as your mobile cover to simulate magnetic cards for any normal POS terminal enabling contactless transaction without any additional hardware requirement for the merchant. With the Samsung acquisition now Galaxy S6 and other flagships will include this MST technology which in our opinion needs much less effort to become hit compared with other solutions. Global launch of this feature for Samsung is set for July 2015.
SMB Customized Solutions
Reaching the new age, even small shops and businesses now need financial management systems performing recurring billing, mobile payments, online gateway in addition to inventory and sales management to keep their business running. These essential needs have created an industry of solution providers utilizing different hardware/software combinations on various platforms helping businesses reach their goals, in store and on the go.
What is notable in this sector is the evolution of shop makers enabling easy transformation from traditional business to e-commerce. There are now strong platforms such as Shopify allowing clients to create their very own professional e-commerce while providing required payment backbone and tools while synchronizing with the offline sales. In this way, all tools and customers are managed by a single solution resulting in better business performance and more satisfied customers.
With Mobile Pos devices (mPos) surpassing 46% in US alone, penetration of these small devices relying on smartphone for secure payment processing are on rapid rise. This empowers SMBs in money collection promoting growth and raising the quality of service.
Digital and LBS Promotions
While technology and internet has allowed a small business reach global customers, limited improvements have they done enabling local market focus; or better saying location based promotions and marketing. With most mobile devices having variety of positioning capabilities resulting in more accurate results, local businesses need advanced solutions to be able to target close-by potential customers and offer them relevant promotions. If we add demography of target audience, then the campaign will have much better effectiveness than current platforms and promotions will be redefined for SMBs. Start-up solutions for mentioned have been launched and it is most certainly in our watch list for this year.
Considering all of the innovative tools and technologies, we are closer to leaving our wallets at home than ever. Using our smart companions for payments, loyalty and staying current with latest offers and promotions will improve financial management for merchants and customers while enabling endless expansion capabilities. For the payment industry, the transformation to mobile is inevitable.