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June 15, 2005
The Future of mobile Payments
Russell has some great insight into the future of mobile payments. He argues that mobile payments will be the primary mean for retail shopping, but only if usability issues are overcome. It'll only work if payment is as simple as, or more simple than using a credit card.
Here are a few other issues:
Security (Trust)
Security issues are still people's main concern regarding on- AND offline payment. The entire payment "path" must be trusted: in practical terms, this means a banking or credit card system and NOT a telco. Telcos aren't trusted. The only way for this to work is something like "Visa MobiPay". I've made this up, but there should be a trusted brand connected to the transaction.
I'd still wage on banks rather than credit card systems, if only because merchants are unwilling to accept credit cards. In (German) food retail, margins are so low that it is quite impossible to introduce credit cards. Even EC's (electronic cash) 0.8% merchant fee is substantial. Germany's largest retailer, Aldi, is only introducing EC-PoS (point-of-sale) this summer.
As most transactions are generated in food retail, the success of a system will depend on what is introduced here.
Security (Peace of Mind) #2
People like receipts. Although these are not technically necessary, people are used to be handed a receipt after a purchase in a physical store (different rules apply online).
If you position your mobile payment system against credit cards, then you need to make sure some sort of physical payment receipt is generated or people will not accept this payment method. This also adds to an increased integration depth with retailers' systems.
A SMS-based receipt is nice to have, but not a must. Further, GSM reception is often bad in superstores (beats me why); waiting for an inbound confirmation SMS is a potential killer in the shopping process. A receipt would have to use the same conduit as the payment - meaning increased production complexity on part of the manufacturers (see my next point below).
I'd say a debit system stands a better chance of being accepted (rather than credit).
Volts!
Irakli's Mobile Payment Rule:
Your handset batteries will die on you when you are at the till with two screaming kids and a shopping cart full of ice cream for their birthday party
Portability
Imagine if every bank teller (cash dispenser) had a proprietary interface and you had to spend some time working out how to use even basic features.
That's the problem you face with mobiles and a universal payment system: how do you make sure the payment experience is the same regardless of a) handset manufacturer and model b) payment software (presumably some Java app?) c) merchant terminal and d) telco
Further, people change handsets at the latest every two years. The least problem is to export all payment confirmations (should these be in the form of SMS). The portability issue means that client-side features should preferably be online so the system is independent of the handset.
This, in return leads to the question why handset manufacturers should invest in providing payment hardware (like nfc / mifare) when they are left out of the transaction model.
My guess is that it depends on what the banks will do. In Germany, the trend is towards secure "swipe + PIN" smart cards which will almost invariably be easier to use that anything mobile related, even if it is only about device batteries.
In summary, I wouldn't place my bets on a payment system that is telco-driven; ideally "swipe" technology and handsets will eventually merge.
Posted by Irakli at June 15, 2005 11:51 AM
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Comments
What about environment whith no sufficient bank penetration like Africa ?
We're busy working on a very simple SMS based system (the lowest common level of technology) with a USSD-PIN confirmation mechanism. Payment are made/accepted in 3 steps only...sounds exciting.
Posted by: Koush at June 22, 2005 01:04 PM