Mobile Payments – Customer interfaces like NFC, USSD, Mobile App and SMS for payments via mobile are in existence for a long time. In-spite of this reality some banks and retailers are still not willing to participate fully. They have legacy reasons like fear of low adoption rate and data share etc. All these excuses (yes excuses) are actually now the story of the past. Originally this post was titled as “Stunned Mythical Facts of Mobile Payments”, this was changed upon request.
Basics of Mobile Payments
In today’s time, the race for data collection is on the rising path where it does not leave any business with too many options to stay out. Payment companies especially new entrants are creating data lakes and data science factories to find and mining new business cases.
The payment technologies covered herein are neither new nor revolutionary innovation. Almost all of them have been here on this planet from decades. Interestingly not all of us are aware or maybe the way I have experienced them was far different from everyone else.
MasterCard, Visa, Euro pay, ApplePay and AndroidPay are the leaders of the growing trend of mobile payment. All of them have been pushing to create a standard for the modern method of commerce so that mobile payments can be easily adaptable/accessible on a global level.
There are many contributors who have reduced the time for payments for the services and goods by refining the process and technologies.
- Using NFC technology to enable “touch & go”.
- Artificial intelligence (Deep Learning methods) which has enabled “smile & go”.
The lack of participation may vanish banks quickly in case they don’t join this era of FinTech intelligence secured with blockchain and crafted on the foundation pillars as data science, artificial learning and machine learning.
The so-called innovators and many players are constantly anxious about protecting their hard-earned franchises, thereby confirming the emergence of the ‘new normal’. I believe in embedding these core elements in the proposition, operating and delivery models will enable players to ‘play to win’ in these turbulent times.
Some Widely Used Customer Interfaces
MasterCard is now claiming that convenience and security for their plastic card will be at the best. Under the banners of technology that will transform payments and the financial system will create a dream world. It will be a world of complete cashless economies in which no one would think to withdraw money from an ATM or stand in line to buy a train ticket.
Near-field communication (NFC) – In NFC two devices exchange data with few centimetres distances from each other. With this exchange of data, payment takes place where one device pay to the other device.
Unstructured Supplementary Service Data (USSD) – GSM communication technology that is used to send text between a mobile phone and an application program in the network. This is the cheapest and widely available method on almost all handsets of today’s time.
Mobile payments or payments through mobile device is not new but a financial technology peace which has not been talked about. Now after artificial intelligence, cognitive computing and machine learning getting popular so the payments
Mobile Application (Mobile App) – A small application installed on Android, windows or IOS devices which use GSM data in the background. This communicates over the internet.
Some Thoughts on Disruption
If we had a Ministry of Innovation for regulation and control on a global level, they would have made today’s innovation work impossible or may have stopped it long back. Apple was able to sell 10 Million handsets were sold in the first 3 days of launch. They launched Apple Pay; an innovative (As per them) solution. From a technology perspective this was neither a new offering nor a game changer but now followed by almost every big player in the industry. Without a doubt, that launch was to set a trend for NBFTC – Non-Banking Financial & Technology companies. That showcased on how to enter into payments. The disruption job was done well to eat banks lunch.
Rapid advancements in mobile technology are changing the way we live; from the way we connect with others to the way we manage our finances. It’s time to rethink mobile payments by putting some of its common myths to rest. One can help grow their business while offering their customers an alternative way of paying their bills while still maintaining a high amount of security.
The other key driver for this is the inaccessibility of banking services to the general populace mainly due to poor infrastructure and lack of trust in local banks by country fellowmen and companies. Payments have a share to move beyond transaction capture to enable a sale (trigger, originate) by aligning to the new ‘consumption context’ of payment services. Partnerships are an effective way to enable this. e.g. Apple Pay is a ‘device franchise’. Utilise collaborative models, where available.
The Customer Experience
Yesterday I was standing at a KFC counter for my Sunday evening meal. After I made my mind I was given a 9 US dollar bill to settle in advance before I collect my stuff (This must be a usual method I guess around the globe). I started searching for cash in pocket and realised I don’t have my wallet. I was about to excuse myself all of sudden a sweet voice brought me back to reality asking how I wish to pay and I was given the following options
- Card Payment (Debit, or Credit)
- Cash Payment
- Mobile Payment (either using my Mobile Wallet via NFC, Mobile App or USSD)
- My Mobile Banking account.
Mobile Payments are an easy and simple concept but sometimes they get oversimplified along with the same reasons for payments under mobile or simplified version as mobile payments about which every single company on this earth is talking about these days and it is true every single company is.
The assumption made here is that the reader is well versed in mobile payments through the mobile wallet or mobile money which is a solution that lets people conduct banking transactions with ease, directly from their mobile device in a secure and convenient manner. Having a full understanding of the business case and technologies we can now get ideas on how to merge these to gain some cost reduction, increase in speed and effectiveness.
To make me crazy enough I was told whichever method I want I can use on the separate counter even via a free phone call to my family/friend (their location can be around the globe) to ask them to pay for my meal. Finally, I paid via my mobile money account using my mobile app on my Apple phone; this whole episode told me very clearly there is no dull day in the payments business these days provided the buyer is willing to pay. The unglamorous world of clearing and settlement is a recipient of generous attention due to continuous launches of visible overlay propositions, often by non-banks. Important questions being;
- How to position a Mobile Payments Portfolio to my consumers?
- What my consumer wants?
- How my consumer wants it?
- How much and when my consumer needs?
Technological innovations have made certain aspects of our daily lives that much easier. The advent of mobile money has awarded those who were previously unable to conduct monetary transactions an easy and affordable alternative to traditional bank accounts. Mobile Payment services may or may not link to your mobile wallet or directly to your bank account.
Payment Services Providers
Traditional payments services providers, including banks as well as the well established big names like Mastercard, VISA etc have to wake-up, smell the coffee and innovate otherwise MNOs will “move their cheese”. Imagine what will happen when social media makes vibes into the payment space. A very interesting fact in the mobile financial industry is we usually receive funds once or twice a month as part of salary or fee but spending is done at least thrice a day, sometimes over 5 times.
This method of spending is known as micro-payment/micro-spending. Putting in numbers, this can go into billions of dollars; an easy example: if we start charging 1 cent per transaction as commission for micropayments through NFC (the stored value card technology) for food, drinks, snacks, petrol, tolls, souvenirs or any similar purchase each one of us spend minimum $5 a day (assumed at 40% of world population) then the total commission earnings will be to the tune of $4.3 billion per month. This market has clearly not been explored that well and this also goes straight into Mobile Money Market as potential leakage plug.
The main drivers behind the success of mobile money are the explosive growth in the number of mobile devices and the fall in the cost of computing power, which has lowered the barriers to new entrants in this field. Mobile money (m-money) is quite versatile and can support a variety of services, in particular, person to person (P2P) money transfers, which are of significant value for emerging economies. When Apple decided to jump on board (Sept-2014), the game changed because all of a sudden they were presented with a guaranteed massive user base for this type of technology and service.
Unlike most of the MNOs, which keep on focusing on and growing the mobile network in a positive way to penetrate the isolated areas, millions of people are now able to connect via a mobile phone. As a result, mobile payments have become a viable alternative to traditional payment methods such as paper, plastic, online or even bank accounts payments.
It integrates servicing to provide differentiated and cost-effective services in real time. This leads into the response to presence, activity and transaction(s) leading to satisfaction of needs. Mobile Payments enable flexible and dynamic integration capabilities for real-time, interoperable messaging. This also acts as a bridge to deliver tomorrow, while enabling ‘insulated incremental transformation’ at the back end. In the new ‘sharing economy’, ownership is not a differentiator though. ‘Build vs Buy’ of yesteryears should synthesize/weave into a ‘Do vs Source’ agenda. Most fulfilment activities, sourced on a variable pricing model are the necessity.
Key Advantages – To All
- Expand financial sector reach by leveraging on a Mobile medium.
- Ease of use for financial services via various interfaces like IVR, USSD, SMS and Smart Apps.
- Expand the set of services to a larger sector of society.
- Solution Providers (Service Provider)
- Acquire a large number of customers for their solution or services.
In case you need detailed information or further deliberation on any part, please feel free to get in touch with me directly. A myth is normally described as a traditional or legendary story so is Mobile Payments, usually concerning some being (Mobile Handset or Technology) or a hero (Mobile) or event (Payment Made), with or without a determinable basis of fact or a natural explanation, especially one that is concerned with deities or demigods and explains some practice, rite, or phenomenon of nature.
Points to Note:
All credits if any remains on the original contributor only. We have covered all basics around myth on mobile payments, its models and the importance of quality services. In the next upcoming post will talk about implementation, usage and practice experience for markets.
Books + Other readings Referred
- Research through open internet, news portals, white papers and imparted knowledge via live conferences & lectures.
- Lab and hands-on experience of @AILabPage (Self-taught learners group) members.
Feedback & Further Question
Do you have any questions about AI, Machine Learning, Telecom billing/charging, Data Science or Big Data Analytics? Leave a question in a comment section or ask via email. Will try best to answer it.
Conclusion: What are the implications of Mobile-based Payments and Solutions? Is it going to change the world, be a significant “win”, be a nice hack? Proximity-based, Mobile App, SMS or USSD, Cloud or hosted mobile payments can support globally and will give financial institutions and partners greater choice in offering consumers secure ways to pay with smartphones.
Time has now come for banks and other entities with an interest in financial service provision, to step up as one team, exploit technology and leverage on existing MNO infrastructure to acquire customers, enrich use cases, lower costs and increase revenue especially in markets where regulators (such as reserve banks) play a dominant role. Support for ‘Regulatory Compliance’ is taken as a given.
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