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Mobile Payment Options

In his previous blog, my colleague Amit Ambekar had talked about various payment types such as Cash on Delivery, Layaway and Buy Now Pay Later. Another payment method which is gaining the importance of late is Mobile Payments. A mobile payment is any payment where a mobile phone is used to initiate, authorize and confirm payments. The widespread uses of electronic commerce and ubiquitous mobile devices have made mobile payments an interesting alternative method of payment for customers and merchants. Currently mobile payments are prevalent in 5 forms -m-wallet, m-banking, contactless card systems, online payment systems, and carrier billing.

In M-wallet payment form, user downloads M-wallet solution on his mobile. Once, M-Wallet Solution is activated, the account and transaction info is stored on a SIM card and subscriber can begin enrolling his/her debit and/or credit cards, which in turn can be used for shopping. M-banking option allows user directly access the subscriber's bank services and information via the mobile device to make payments. Contactless card systems use a short-range high frequency wireless communication technology. It allows customers to pay their bills without swiping their cards. Specialist online payment systems like, Google checkout and PayPal empower users to make speedier payments online and over mobile phones. In Carrier billing form of mobile payment purchases are billed on the subscriber's mobile phone bill.

The mobile payment methods offer unique benefits to customer. They are mainly related to speed and convenience. Contactless mobile payment option cuts down check out time significantly as customers neither have to slide or insert their card into the reader nor do they need to enter pin number. Moreover, the possibility of them forgetting their credit card in the reader or on the counter at the end of the transaction reduces to zero.

Retailers are also realizing a number of benefits from mobile payment options. Fast transaction times move customers more quickly through the payment process, thus reducing longer check-out queues especially during peak season. Increased customer spending, increased frequency of purchases, and increased customer loyalty increase revenues. Reduced cash handling, improved payment terminal reliability, and streamlined payment processes improve operational efficiency and reduce operating costs. Many retailers like Sainsbury's have self-checkout option. Mobile payment options would definitely accelerate the checking out process.

However, mobile payments also provide some challenges to retailers especially on technology front. From customer's point of view security is the most important factor. The biggest fear of customers is that if phone was lost or stolen then a thief could quickly rack up a fortune in transactions. In case of contactless payment options, providing wireless network security in line with PCI DSS standards, could results in significant upfront investment for retailers. They also need to deploy additional point-of-sale equipment capable of accenting mobile payments. Also, the speed at which the transaction is completed should be less than that of the credit card or cash and it should be hassle free. Any extra effort needed on part of the consumers would not help the cause of mobile payment.

Apart from technological challenges, retailers also have some strategic challenges like choosing the type of payment dimension they want to focus on. Because of the associated payment transaction costs, retailers have to decide whether they want to provide mobile payment options to low value (< $10) transactions.

Thus, mobile payment options have potential to generate some significant benefits for the merchants and their customers, provided that retailer are able to handle technological challenges successfully.


The retail companies collectively should grow the infrastructure required to start contactless Near Field Communication (NFC)in this year-2012. There should also be support from mobile phone companies for its implementation. There must be adequate security measures taken and tested before it is launched in market. This could be the fastest payment method in physical stores, hence security measures could be required. It would definately help reduce time taken to check out at the POS machine. The long queues for payments at supermarkets/hypermarkets would also be shorten.

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