April 24, 2012
We all have a habit of taking our phones with us everywhere we go (and we mean everywhere). So wouldn’t it make life much easier if we could all conduct our everyday transaction needs through our mobile device?
Let’s say you’re on your morning commute, ready to get your Starbucks coffee fix, only to find you didn’t bring your wallet. Bummer–unless you could just pay with your smartphone! Through mobile payments, a scenario like this is possible (ahem, Starbucks app & Google Wallet) making your life easier to manage and placing an even higher value on mobile phones.
So what defines mobile payments (mPayments)? mPayments are simply an alternative payment method to using actual cash, checks or credit/debit cards where users use their mobile phones, data plan and/or phone bills to pay for products and services.
The adoption of mobile payment solutions is context-driven for each industry and marketers must have a clear understanding of consumer needs, perceived obstacles, benefits that shape the mobile ecosystem, and technological developments to find a service that best suits its context. Although mobile payments are still in the early stages, some obstacles–such as security concerns and user adoption–are things that marketers need to address in order to get consumers on board.
Overall, mobile payments can be adopted in a variety of ways and the ability to pay via mobile is seen as a major differentiator for US consumers when it comes to staying loyal. According to a Global Consumer Telecommunications Survey, some of the most common transactions via mobile payments include:
- Merchandise purchases
- Bill payments
- Mobile money transfers
- Purchase of digital products
- Transportation payments and ticketing
Not only are mobile payment transactions varied, but there are also several types of implementation methods for the technology. Here are the four primary models for mPayments:
1. Premium SMS Based Transactional Payments: This service is used when consumers are required to send a payment request via an SMS text message to a dedicated short code. A premium SMS charge is applied to the customer’s phone bill. As soon as the payment is received by the mobile operator, the retailer or merchant involved in the transaction is informed of a successful payment and can then release the payment for the goods.
2. Direct Mobile Billing: This payment solution is used in various Asian countries and mostly when users make online purchases. Prior to checkout, users are asked to send a keyword to a short code in order to receive a pin and a one-time password, for added security. The transaction is later charged directly to the customer’s phone bill and not as an SMS message.
3. Mobile Web Payments: Often confused with mCommerce, mobile web payments enable consumers to make purchases and complete transactions through a mobile application or web page using their mobile line to make the payment. This application of mPayment has a number of benefits including follow-on sales, high customer satisfaction and ease of use.
4. Contactless NFC (Near Field Communication): NFC is used mostly in paying for physical purchases made in retail stores. Consumers wave a NFC-enabled phone near a reader module, and the transaction is instant. Most transactions do not require authentication, but some do require a PIN to complete the transaction. The payment can be deducted from a pre-paid account or charged directly to a mobile or bank account.
Retailers all over the world are beginning to see the advantage of mobile payments. Not only will these solutions be convenient for consumers, but retailers will also benefit by creating more personal communication, collecting information from mobile transactions based on the customer’s purchasing behavior, likes and preferences. Retailers will be able to provide customized recommendations and personalized offers, paving the way for mobile CRM and loyalty campaigns.
Do you think mobile payment solutions will be big in the coming years? Have you implemented mPayment solutions in your locations? Share your thoughts with us, below!