Despite the famous quote by Varun Ravikumar stating "IT IS NOT THE PAST THAT MATTERS, BUT THE FUTURE". We are all well aware that a sound knowledge on the details of the past allows us to better predict the future and be ready for it.
This maxim can be likened with Mobile Payments and how this article serves as your overview of how it has evolved; as well as your anchor of familiarity to predict the upcoming major trends. Indeed, Mobile Payments presented itself with tremendous amount of changes over the years and even continuously re-invents itself every quarter. This surprised not only the market but the industry in general.
The succeeding points will cover the evolution of purchasing goods and services from the mobile and not via phones to pay in stores (such as NFC, Wallet etc).
1. WAP – For those of you who entered the mobile era in around year 2000, you probably remember the hype around Wireless Application Protocol commonly known as WAP.
It allowed for the very first time the ability to consume data in a mobile handset. At that time, every mobile operator created a mini-portal that can consume basic data such as news and sport highlights. In those portals, user could buy ringtones, icons and basic Java-based games.
Payment was done by the mobile carrier - this was the period where mobile payment started to flourish. Not big amounts but relatively lots of transactions.
2. Premium SMS – Initially, premium SMS were used only to buy digital content such as ringtones and games. However, soon after it was adopted massively by other entities and was used for mass collection of small payments. We were all witnesses of its main usage in reality shows where the viewers could vote for their favourite singers, dancers and reality stars by sending SMS with their choice.
It was an innovative way to engage and excite the audience by allowing them to choose and influence the show’s outcome. In return, a small token or percentage per vote goes directly to the mobile operators.
To date, premium SMS is still one of the most cost effective ways to collect micropayments.
3. A major change in Mobile Payments took place when 3G was introduced along with phones that could browse the web. The 3G gave speed, hence, richer content was provided on a coloured screen.
This has created a big stir in the market where users started to browse the web in dedicated internet browsers. They were limited in functionality but allowed users to have the first feeling of surfing the web from the conveyance of their very own handsets. Users were provided a medium where they could click on links or scan 2D barcodes for fast access to any desired content. At this point, payment started to take place by using credit and debit cards.
The actual transactions were minuscule, but the foundations of technology were clearly there and is ready to evolve.
4. Smart Phones – When the next generation of smart phones were released, led by Apple and followed by others, the Mobile Web experience and Mobile Payment entered a new level of usage. However, while the technology was there, users were not yet inclined in completing payment transaction from their phones.
Smart phones were used to browse for products and services that they were interested in, but completed the actual transaction from their PC or laptop.
5. In-App Payment – App Store and Google Play brought new dimensions to Mobile Payments by taking the role of a middleman that collect funds on behalf of the merchants. No one could have imagined this revolution where technology companies will take the role of fund collectors – a case where payments are done directly to them and in turn distributed to the merchants and content providers. Initially, content was mainly digital, however evolved to other goods and services beyond the digital space.
6. UI and UX – Initially the evolution of online merchant from PC to Mobile was just to squeeze the content from 15-inch screen to 5-inch screen with high hopes that it will do the trick. Well, it didn’t. Merchants started to understand that the entire User Interface (UI) and User Experience (UX) needs to be changed in order to see major conversion from “browsing” to “buying” on the mobile. After all, there’s more to mobile vs. laptop than the screen size, the way you hold it, the speed you key in details, the trust you give it (initially mobile were perceived as less secured).
These developments lead us all into thinking “What’s the next step with Mobile Payments”?
One of the main problems in payments is certainly the issue of security. In order to mitigate the security problem, customers need to prove that they are who they say they are and that the credit card they hold is indeed theirs.
The latest 3D secure mechanism along with the CVV is doing a good job, but the user experience is not comfortable nor ideal. In a 3D-secure environment, users attest to their identity by undoubtedly proving ownership on something. Say for example, a user received a one-time password (OTP) to his personal handset, and the CVV code on the back of the card proves that the user actually holds the physical card at hand.
While the 3D secure system works, the user experience is cumbersome and there are loopholes where things can go wrong: keying the SMS password wrongly or mistakes in the card’s 16-digit number are sometimes unavoidable.
This is where the role of Biometric technology comes in -- the provision of an ultimate authentication of the user’s identity before being granted access to a secure system. Biometric authentication can come in the shape of a finger print, eye ball pattern, voice pattern and more. This system heavily relies on biological and unique characteristics of an individual which are harder, if not impossible, to alter or modify.
Biometrics already started to be commonly used in mobile phones to unlock or to approve purchase in Apple Store. However, it is still in its infancy stage in relation to replacing the entire traditional payment system. We are not there yet bit it is not farfetched either. It is the best direction we can foresee with the rate things are going in the industry.
What we should all look forward to is how soon it seems that users will be able to attach their credit cards to their own identities. You can now imagine yourselves being able to pay with the convenience of our finger prints, voices and maybe with a few blinks of our eyes. The card details will be stored in a centralized repository, and can be used by simply getting the user approve all these with Biometric authentication.
With this, we can only expect more improvements with the way we facilitate our payments. As users, consumers and members of the industry, we’re all definitely in for a good ride.
Yoav is the CEO of YuuPay Secure Pte Ltd, a Singapore-based Payment Service Provider. He has over 15 years of experience in the Payment, Mobile and IT Industry, specializing in Mobile Payment, Mobile Value Added Services (VAS) and Internet and Mobile content. He has an MBA from Heriot Watt University and a BA in IT and Business Administration.
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