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    August 2013
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    Mobile Payments on the Move

    Gerald Trites, FCA, CPA

    Although the idea of mobile payments has been tossed around for several years, the actuality has been rather choppy. There have been several applications, but no system has taken the market by storm.

    Payment systems are generally classified as either in-store payments or online payments. The most popular payment system for in-store payments is the debit card, followed closely by credit cards. For online payments, the situation is the reverse – credit cards followed by debit cards, although in this case, the distance between them is much larger.

    When we talk about mobile payments, however, we are usually talking about the ability to pay for transactions in a way that automates and streamlines the process using mobile devices. Several mobile payment systems have been used, with the touch and go type being most popular. These involve the ability to touch a tab or a card to a device and have them communicate with each other and complete a transaction. Usually these devices use a form of Near Field Communications (NFC) and require a special chip in the mobile device or card.

    Google Wallet has extended that process to mobile phones, specifically Android phones with a build-in NFC chip. This approach has gained some usage in the US. Google Wallet can also be used for online transactions, and is being improved to make online buying much easier, thus reducing the occurrence of Shopping Cart Abandonment, something that most online retailers would dearly love to accomplish. Google Wallet is a major initiative of Google and is well positioned to play a prominent role in the mobile payment sector.

    One of the other most common payment systems for online purchases is Paypal, although the most common application for small businesses simply provides a vehicle for the use of credit cards online. Paypal is also initiating a mobile payment system for mobile phones and is likely to be a major player, given its prominence in online payments.

    Some new systems are looking beyond the traditional paradigm. Imagine for a moment that you are going to a fast food store for lunch. (Never mind the diet implications for now!) The typical approach is you go and wait in a line or sit in your car until you can talk to an employee who takes your order and your payment. Then quite often you go to another lineup and wait for your order.

    More innovative products involve this model being changed by making better use of  smartphone technology. Under this model, you pull up in your car and connect with the store inside, using their Wifi. Or you go inside and connect using Bluetooth. The pairing process can be automated. Then you make your order and pay for it on your phone immediately and transmit a picture of yourself to the store. When you go to the pick-up line to get your product, you simply state your name, which the attendant enters and which brings up your picture, which she uses for verification and you get your order. One line and a faster, simpler in-store process. The new App, Square Wallet, uses this approach and is getting some real attention. Using an app minimizes the keystrokes required to place the order and pay for it.

    With old players strengthening their hand and new players coming up with good ideas, the use of mobile payment systems is on the crest of a new wave. And the new wave will likely involve a whole new way of making purchases in a store, not necessarily using NFC but perhaps also using old fashioned WiFi and Bluetooth.

     

    The MONEY® Network