Using the cellphone for making payments is probably the most intensively developed service idea of recent times. It seemed clear that a handheld with an associated payment method and a permanent, secure connection was the ideal candidate for replacing or at least complementing traditional means of payment.
Up to now, however, no approach seems to have built up significant usage figures. Few doubt that solutions of this type will be successful in the future but it is by no means clear as yet which model will win out in the end and above all how long we will need to wait to see it.
Different mobile payment solutions
Mobile network operators were the first to pitch in. In Spain the pioneer attempt went under the name of mobipay, which kicked off in about 2001. Users had to associate a credit card to the service by means of a secret validation number. Payments were requested and confirmed by USSD and SMS. Although the idea was sound, it was actually operated only in pilot mode for some vending services. Some years ago the idea resurged with the advent of NFC-enabled handhelds. On this occasion several operators developed solutions based on SIM-card storage of payment information. These products have not yet had the expected takeup and the idea seems to have dead-ended.
At the same time, with the advent of smartphones, many handheld payment apps have appeared on the scene. Some have developed from the loyalty card idea, like Vips or Cepsa; others as a value-added service of some banks. There are also many projects allowing payments to be made in certain places using the cellphone camera to read QR codes. With a patchy success rate, these apps, at the end of the day, are only partial approaches for certain use cases and limited user groups.
The new kids on the block are mobile operating system developers with their Android Pay and Apple Pay products. The high expectation whipped up, especially by Apple, has as yet fallen flat, though things might well pick up in the mid-term.
Much the same goes for Samsung’s payment solution. This system has the advantage of being compatible with traditional POS card readers, allowing for easier phase-in with existing points of sale.
Microsoft has also announced that it is working on a similar solution for its mobile platform, which has not yet seen the light of day.
Barriers to be overcome
In light of events to date, the perfect solution does not yet seem to have arrived. Extrapolating from past experience, we can at least take an educated guess at the barriers that this solution would have to overcome, or, to put it another way, which features it would have to include.
Trustworthiness: Users have to be able to trust the technology they are using. First and foremost they have to regard the input of credit-card data as trustworthy. They are bound to have doubts about how this data is stored and also about what happens if the handheld is lost or stolen. Secondly they have to be comfortable when using the app.
Easy sign-up: This could be a crucial factor. Some of the payment apps/services have complex sign-up processes involving a big data input, the creation of accounts with passwords, reading and accepting reams of conditions, etc. It is difficult for users to complete this whole process just at the moment that the payment is made.
User friendliness: It is vital for the service-using experience to be at least as good as the traditional credit-card payment method. Any slow or unwieldy payment method calling for many checks will be dead in the water. Dependability is another crucial factor; the service has to be error-free and it also has to be designed to work reasonably well even in conditions of poor connectivity.
Universality for users: Future users are unlikely to put with having to handle many payment applications in their cellphones with different passwords, use methods and forms of payment. More likely to be successful is a single-solution scenario including different means of payment and valid for making payments in many different sites, using a similar modus operandi to traditional payment methods.
Universality for vendors: Along similar lines, vendors can hardly be expected to run several different systems for collecting payments from their clients. The ideal scenario would be a solution compatible with the payment-collection elements of current systems. Another possible option is for a reasonably small adaptation to be usable by a large number of users.
Presenting a clear advantage: And the last sine qua non is that the service offers a real advantage over current payment methods rather than merely replacing them. One of the clearest incentives would be if the new service enables users to pay in situations where credit-card payments are difficult. Examples that spring to mind are parking meters and some types of self-service facilities. Promotions or temporary discounts might help but are unlikely to offer a big enough incentive single-handedly.
The short-term future
The jury is still out on which solution will win out in the end, either in its current form or more likely with a future tweak or two.
The front runners are perhaps the native operating system solutions. Some of the barriers do not exist for these solutions, given that most users already input purchase-payment methods in application portals. They are also the most likely to be able to improve user experience and guarantee across-the-board use from many different applications. As yet they have not achieved good market penetration. Apple Pay is still available only in the USA and UK and although there is some talk about a Spain launch in 2016 there is as yet no hard news on exactly when or under what conditions.
The crucial feature, in any case, is not so much which solution wins out but the new possibilities opened up. As with many other technological breakthroughs, the best uses are probably yet to be discovered.
Some links of interest
- Exploring Consumer Adoption of Mobile Payments – A Qualitative Study (Article of December 2007)
- Opinion on Samsung Pay
- Differences between Android Pay and Apple Pay (Spanish)
- Apple Pay could hit Spain in 2016 (Spanish)
- Microsoft wants to get in on the mobile payment act with Windows 10 (Spanish)
Author: Crescencio Lucas Herrera
Las opiniones vertidas por el autor son enteramente suyas y no siempre representan la opinión de GMV
The author’s views are entirely his own and may not reflect the views of GMV