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Mobile Payments 3.0

A Peek Into The Present Scenario And Emerging Technologies In Mobile Payments

In the last two years, the mobile payments sector has seen a revolutionary change in the way we shop, pay bills and manage other daily payments using our phone! The all pervasive and constant presence of mobile devices in our lives has led to a tremendous boom in e-commerce. Mobile wallets or digital wallets which eliminate the use of physical hard cash altogether are exceedingly being used in conducting business online. How convenient our life has become as we shop, just with the help of some taps and swipes!

According to the CIOL report, most mobile payment users are in the age bracket of 18-44 years. We have a huge number of  e-commerce sites coming up every day which use sophisticated data technology and have adamantine security features. This is coupled with the growth of tech-savvy customers who know how to use their digital gadgets with great expertise. In this scenario, the next generation customer wants to get the best user experience of the optimizing technology, which helps to seamlessly connect our cash/bank accounts to our phones.

Over the last few years we have seen disruption in the mobile payments world by big players like Paytm, Mobikwik, Freecharge, Citrus and many more, each of them offering their USP and features. However, this segment is still at its nascent stage and needs lots of thought-leadership, improvisation and market- penetration in order to maximize its operations.

Let’s first decode mobile wallets: In common terms, a mobile wallet is a digital or virtual wallet stored on a user’s phone which is pre-loaded with a particular amount as per the user’s wish and is subsequently used for payments. These are available with the set premises according to the central bank statutes and contracts with retail merchants. For example:

  • A ‘Closed wallet’ is the one where money is locked and redemption is not possible such as issued by Flipkart, Jabong and Snapdeal 
  • ‘Semi-closed wallets like Paytm and Citrus offer payments solutions with specific retailers to accept payments with whom they have a contract with
  • ‘Semi-open wallets’ like Airtel Money which allows transactions with merchants having a contract with Airtel but does not allow cash withdrawal
  • Recently we have seen the introduction of ‘open wallets’ issued by major banks such as Axis-Ping Pay, HDFC-PayZapp which allow users to purchase, transfer as well as withdraw cash at ATMs

A robust growth has been observed in the mobile payments market and reports suggest that it will reach USD 6.6 billion by 2020, as per the India Mobile Wallet Market Forecast and Opportunities, 2020. However, the industry still sees lot of hitches when it comes to mass- adoption.

So what is holding back the consumers from getting into this system? Well, there are still a large majority of users who believe in following the ‘safe’ conventional cash-based payment method and are wary of any new interventions.  This is mainly because there is a major scarcity in mass-awareness drives to advertise these new methods, therefore the users outside the bracket of 18-44 years remain unutilized. And what about privacy, personal data-hacking and security issues? How can the customer be convinced that there shall be no identity theft or payment frauds?

The low penetration of mobile payments in everyday life is seen mainly because of certain unfortunate consumer experiences which disrupts the entire process. Let’s take some examples:

Case 1 –  A person takes a cab service and his bill comes to say Rs. 500. He has a semi-closed wallet of any XYZ company, which does not have that cab service in its contract rolls in order to accept the payment! The customer pays cash which of-course helps him in this situation. How should one know in advance which retailer is accepting which company’s mobile payments? Does this mean that one should stock all major mobile wallets on one’s phone? There are about 7 major players in the market!

Case 2 – A person goes to a fine restaurant for a business lunch and the bill comes to Rs. 1000. He was about to use the mobile wallet but at the final moment his mobile network goes out of range. Finally, he pays through his debit card and saves himself from embarrassment. So, has our technology and infrastructure reached those levels where mobile wallets are fully workable without any glitches?

The scenarios are many and app developers are working out ways to mitigate the issues faced by people. Every new fin-tech company is trying to take advantage over the shortcomings of its competitors.

In order to gain maximum foothold in the mobile payments space in the present scenario, fintech enterprises are bringing innovative products which are revolving around the most advanced technology platforms like Bluetooth , NFC and sound-wave technology to  provide a seamless, hassle-free connectivity between the customer, their phone which acts as a PoS (Point-of-Sale), and the receiving end (like a brand or a retail merchant).

One of the payment innovations being touted as next big revolution is – Sound Wave Payment. This ‘quiet’ technology uses sound waves between devices to make mobile payments. However, the system is based on ‘yesteryears’ technology and the new enterprises are approaching this platform with the view to benefit in terms of costs, scalability, and easy implementation, factors that can make this technology become a game changer.

Soundpays, a Toronto-based mobile payments start-up has come up with a product that works on ‘noise’ technology. The inaudible sound waves are sent from a device to a Soundpays mobile wallet which enables the user to complete the payments through his/her credit/debit account. The system being based on a ‘ubiquitous’ platform, allows mobile purchases anywhere, wherever there is a speaker. Being based on unidirectional technology, the user’s payment information does not get stored in the system, which makes hacking of personal data impossible.

Another similar enterprise in this space is China’s largest e-payment provider Alipay. It launched its wallet mobile app, based on sound-wave technology in the Beijing subway that connects the consumer’s smartphone with different vending machines.

A new entry in this technology arena is Ultracash, which is a product of a Bangalore-based tech firm. The technology being used here is based on data transfer with very high frequency and inaudible sound waves through two mobile devices using their speaker and microphone. The product does not need internet which is its distinguishing feature. It does not require money pre-loading and uses consumer’s bank account/credit or debit card to complete the payment chain. The system follows strong encryption algorithms and thus provides a secure payment channel.

While we have seen NFC (Near  Field Communication) technology doing the rounds already in mobile payments in the form of ApplePay or Android Pay in last few years but still its inefficiency in giving the consumer a frictionless and seamless experience has led to its slow adoption. Another fine version of NFC which is also gaining popular ground is BLE (Bluetooth Low Energy) or Beacon transmitter mobile technology which comes with the benefits of allowing multiple connections and it also operates at a much longer range than NFC. PayPal Beacon and Apple iBeacon are some of the projects which are operating with this feature.

While the buzz is also that even Bitcoin could become another potential in payment technology. Well, it could be very interesting to see how the virtual currency appears in our virtual wallets.  Right now, they are not insured by the FDIC (Federal Deposit Insurance Corporation) but once bitcoin comes into action, the mobile payments industry could be seen in an entirely new avatar!

Here are a few questions that I want answered:

  • Which technology can get the maximum people on board in the still untapped market of merchants?
  • How can we enable the merchants get acclimatized to the payment ecosystem by reducing their cost of transactions and doing away with passive machines and cumbersome operational processes?
  • And finally, which technology has the potential to break the path in making the world a truly cashless and cardless place?

This is just a beginning in the new era of digital payments. Major payment technology breakthroughs are waiting to happen. Which technology gets the final consumers’ nod is definitely something I am curious to know!