I balanced my checkbook today, and it took me a long time because there were several Venmo payments/receipts. According to Wikipedia, Venmo is an American mobile payment service founded in 2009 and owned by PayPal since 2012. It is aimed at friends and family who wish to split bills e.g., for movies, dinner, rent or event tickets. Account holders can transfer funds to others via a mobile phone app; both the sender and receiver must live in the United States. The company handled $159 billion in transactions in the first quarter of 2018. So, it is a HUGE business, and that is just one app. Anyway, I had trouble balancing my checkbook because whenever I paid or got a receipt of money from anyone, I would write it in my checkbook. But that doesn’t always work with Venmo. If I don’t push a button immediately transferring that debit or credit to my bank account, it will accumulate and a standard monthly transfer — which is a combination of debits and credits will be posted. If there is no balance, it will automatically credit my account for any payments. It’s kind of confusing and took me awhile to figure out. Another mobile payment service I use is Zelle which is through my bank (Chase). It automatically enters each transaction in my bank account. Also, the name of Zelle users is attached to their phone numbers, making it easy to find people. Venmo users have a unique name and number. I use mobile payments mostly when I go on trips with my sisters, and we share the expenses. Recently, my Sunday school class had a Christmas party where they all ordered food from a particular restaurant that delivered. As the social chairman, I paid for the full order, and members of the class paid me back via cash, check, Venmo or Zelle. It worked great. Mobile payments are a very convenient way to transfer money to other people when you are sharing a meal. No more quibbling over who owes what. Let’s learn more about mobile payments.
Mobile payment — also referred to as mobile money, mobile money transfer and mobile wallet — generally refers to payment services operated under financial regulation and performed from or via a mobile device. Instead of paying with cash, check or credit card, a consumer can use a mobile app to pay for a wide range of services and digital or hard goods. Although the concept of using non-coin-based currency systems has a long history, it is only in the 21st century that the technology to support such systems has become widely available.
Mobile payment is being adopted all over the world in different ways. The first patent exclusively defined "Mobile Payment System" was filed in 2000.
In developing countries, mobile payment solutions have been deployed as a means of extending financial services to the community known as the "unbanked" or "underbanked," which is estimated to be as much as 50% of the world's adult population, according to Financial Access' 2009 Report "Half the World is Unbanked." These payment networks are often used for micropayments. The use of mobile payments in developing countries has attracted public and private funding by organizations such as the Bill & Melinda Gates Foundation, United States Agency for International Development and Mercy Corps.
Mobile payments are becoming a key instrument for Payment Service Providers or PSPs and other market participants, in order to achieve new growth opportunities, according to the European Payments Council or EPC. It states that "new technology solutions provide a direct improvement to the operations efficiency, ultimately resulting in cost savings and in an increase in business volume."
Models
There are four primary models for mobile payments:
- Bank-centric.
- Operator-centric.
- Collaborative.
- Independent Service Provider or ISP.
In bank- or operator-centric models, a bank or the operator is the central node of the model, manages the transactions and distributes the property rights. In the collaborative model, the financial intermediaries and telephonic operators collaborate in managing tasks and share cooperatively the proprietary rights. In the ISP model, a third party of confidence operates as an independent and “neutral” intermediary between financial agents and operators. Apple Pay or PayPal are the ISPs the most frequently associated with this model in these last months.
There can also be combinations of two models. The operator/bank cooperation model is emerging in Haiti.
Financial institutions and credit card companies as well as internet companies such as Google and a number of mobile communication companies such as mobile network operators and major telecommunications infrastructure such as w-HA from Orange and
smartphone multinationals such as Ericsson have implemented mobile payment solutions.
According to Justin McCarthy’s Jan. 22, 2018 article “The four mobile payment models” at medium.com, in the bank-centric model “a bank deploys mobile payment applications or devices to customers and ensures merchants have the required point-of-sale or POS acceptance capability. Mobile network operators are used as simple carriers; they bring their experience to provide Quality of Service or QOS assurance.
In the operator-centric model, the mobile operator acts independently to deploy mobile payment service. The operator could provide an independent mobile wallet from the user mobile account (airtime). A large deployment of the operator-centric model is severely challenged by the lack of connection to existing payment networks.
Mobile wallets
A mobile wallet is an app that contains your debit and credit card information so that users can pay for goods and services digitally by using their mobile devices. Notable mobile wallets include:
- Alipay.
- Apple Pay.
- BHIM.
- Google Pay.
- Gyft.
- LG Pay.
- Huawei Pay.
- Mi Pay.
- Line Pay.
- Samsung Pay.
- Venmo.
- WeChat Pay.
- PhonePe.
- Paytm.
- Amazon Pay.
Generally, this is the process:
First payment:
- Users register and input their phone numbers. Provider sends them an SMS or text
message with a PIN.
- Users enter the received PINs, authenticating the numbers.
- Users input their credit card info or other payment methods if necessary — not necessary if
the account has already been added — and validate payments.
For subsequent payments users re-enter their PINs to authenticate and validate payment.
Requesting a PIN is known to lower the success rate — conversion — for payments. These systems can be integrated with directly or can be combined with operator and credit card payments through a unified mobile web payment platform.
Credit card
A simple mobile web payment system can also include a credit card payment flow, allowing consumers to enter their cards’ details to make purchases. This process is familiar but any entry of details on a mobile phone is known to reduce the success rate or conversion of payments.
In addition, if the payment vendor can automatically and securely identify customers, then card details can be recalled for future purchases turning credit card payments into simple single click-to-buy, giving higher conversion rates for additional purchases.
However, there are concerns regarding information and payment privacy when cards are used during online transactions. If a website is not secure, for example, then personal credit card info can leak online.
Carrier billing
Consumers use the mobile billing option during checkout at an e-commerce site — such as an online gaming site — to make a payment. After two-factor authentication involving the consumer's mobile number and a PIN or One-Time-Password — often abbreviated as OTP — the consumer's mobile account is charged for the purchase. It is a true alternative payment method that does not require the use of credit/debit cards or pre-registration at an online payment solution such as PayPal, thus bypassing banks and credit card companies altogether. This type of mobile payment method — which is prevalent in Asia — provides the following benefits:
1. Security – Two-factor authentication and a risk management engine prevent fraud.
2. Convenience – No pre-registration and no new mobile software is required.
3. Easy – It's just another option during the checkout process.
4. Fast – Most transactions are completed in less than 10 seconds.
5. Proven – 70% of all digital content purchased online in some parts of Asia uses the
direct mobile billing method.
Premium SMS- and premium MMS-based transactional payments
In the predominant model for SMS payments, consumers send payment requests via SMS text messages or Unstructured Supplementary Service Data — USSDs sometimes referred to as “quick codes” or “features codes” — to short codes, and premium charges are applied to their phone bills or online wallets. The merchant involved is informed of the payment success and can then release the paid-for goods.
Since a trusted physical delivery address has typically not been given, these goods are most frequently digital with the merchant replying using a Multimedia Messaging Service or MMS to deliver the purchased music, ringtones, wallpapers etc.
A MMS can also deliver barcodes which can then be scanned for confirmation of payment by a merchant. This is used as an electronic ticket for access to cinemas and events or to collect hard goods.
Transactional payments via SMS have been popular in Asia and Europe and are now accompanied by other mobile payment methods, such as mobile web payments or WAP, mobile payment clients such as Java ME and Android and Direct Mobile Billing.
Inhibiting factors of Premium SMS include:
1. Poor reliability – Transactional premium SMS payments can easily fail as messages get
lost.
2. Slow speed – Sending messages can be slow, and it can take hours for a merchant to get
receipt of payment. Consumers do not want to be kept waiting more than a few seconds.
3. Security – The SMS/USSD encryption ends in the radio interface, then the message is a
plaintext.
4. High cost – There are many high costs associated with this method of payment. The cost
of setting up short codes and paying for the delivery of media via a Multimedia Messaging
Service and the resulting customer support costs to account for the number of messages
that get lost or are delayed.
5. Low payout rates – Operators also see high costs in running and supporting transactional
payments, which results in payout rates to the merchant being as low as 30% — usually
around 50%.
6. Low follow-on sales – Once the payment message has been sent and the goods received,
there is little else consumers can do. It is difficult for them to remember where something
was purchased or how to buy it again. This method also makes it difficult to tell a friend.
Remote payment by SMS and credit card tokenization
Even as the volume of premium SMS transactions have flattened, many cloud-based payment systems continue to use SMS for presentment, authorization and authentication, while the payment itself is processed through existing payment networks such as credit and debit card networks. These solutions combine the ubiquity of the SMS channel with the security and reliability of existing payment infrastructure. Since SMS lacks end-to-end encryption, such solutions employ higher-level security strategies known as “tokenization” and “target removal,” whereby payment occurs without transmitting any sensitive account details, username, password or PIN.
To date, point-of-sales mobile payment solutions have not relied on SMS-based authentication as a payment mechanism, but remote payments such as bill payments, seat upgrades on flights and membership or subscription renewals are commonplace.
In comparison to premium short code programs which often exist in isolation, relationship marketing and payment systems are often integrated with customer relationship management, enterprise resource planning, marketing-automation platforms and reservation systems. Many of the problems inherent with premium SMS have been addressed by solution providers. Remembering keywords is not required since sessions are initiated by the enterprise to establish a transaction specific context. Reply messages are linked to the proper session and authenticated either synchronously through a very short expiry period — every reply is assumed to be to the last message sent — or by tracking session according to varying reply addresses and/or reply options.
Mobile web payments — Wireless Application Protocol or WAP
Consumers use web pages displayed or additional applications downloaded and installed on their mobile phones to make payments. It uses Wireless Application Protocol or WAP as the underlying technology and thus inherits all the advantages and disadvantages of WAP. Benefits include:
1. Follow-on sales where the mobile web payment can lead back to a store or to other goods
the consumer may like. These pages have a URL and can be bookmarked making it easy
to revisit or share.
2. High customer satisfaction from quick and predictable payments.
3. Ease of use from a familiar set of online payment pages.
However, unless the mobile account is directly charged through a mobile network operator, the use of a credit/debit card or pre-registration at online payment solution such as PayPal is still required just as in a desktop environment.
Mobile web payment methods are now being mandated by a number of mobile network operators.
Direct operator billing
Direct operator billing — also known as mobile content billing, WAP billing and carrier billing — requires integration with the mobile network operator. It provides certain benefits:
1. Mobile network operators already have a billing relationship with consumers, the payment
will be added to their bill.
2. Provides instantaneous payment.
3. Protects payment details and consumer identity.
4. Better conversion rates.
5. Reduced customer support costs for merchants.
6. Alternative monetization option in countries where credit card usage is low.
One of the drawbacks is that the payout rate will often be much lower than with other mobile payments options. Examples from a popular provider:
- 92% with PayPal.
- 85 to 86% with credit card.
- 45 to 91.7% with operator billing in the U.S., UK and some smaller European countries, but
usually around 60%.
More recently, direct operator billing is being deployed in an in-app environment, where mobile application developers are taking advantage of the one-click payment option that direct operator billing provides for monetizing mobile applications. This is a logical alternative to credit card and premium SMS billing.
In 2012, Ericsson and Western Union partnered to expand the direct operator billing market, making it possible for mobile operators to include Western Union Mobile Money Transfers as part of their mobile financial service offerings. Given the international reach of both companies, the partnership is meant to accelerate the interconnection between the mobile commerce market and the existing financial world.
Contactless near-field communication
Near-field communication or NFC is used mostly in paying for purchases made in physical stores or transportation services. A consumer using a special mobile phone equipped with a smartcard waves his/her phone near a reader module. Most transactions do not require authentication — but some require authentication using PIN — before transaction is completed. The payment could be deducted from a pre-paid account or charged to a mobile or bank account directly.
Mobile payment method via NFC faces significant challenges for wide and fast adoption, due to lack of supporting infrastructure, complex ecosystem of stakeholders and standards. Some phone manufacturers and banks, however, are enthusiastic. Ericsson and Aconite are examples of businesses that make it possible for banks to create consumer mobile payment applications that take advantage of NFC technology.
NFC vendors in Japan are closely related to mass-transit networks, like the Mobile Suica used since January 28, 2006 on the JR East rail network. The mobile wallet Osaifu-Keitai system — used since 2004 for Mobile Suica and many others including Edy and nanaco — has become the de facto standard method for mobile payments in Japan. Its core technology — Mobile FeliCa IC — is partially owned by Sony, NTT DoCoMo and JR East. Mobile FeliCa utilizes Sony's FeliCa technology, which itself is the de facto standard for contactless smart cards in the country. NFC was used in transports for the first time in the world by China Unicom and Yucheng Transportation Card in the tramways and buses of Chongqing on January 19, 2009, in those of Nice on May 21, 2010, then in Seoul after its introduction in Korea by the discount retailer Homeplus in March 2010, and it was tested, then adopted or added to the existing systems in Tokyo from May 2010 to end of 2012. After an experimentation in the metro of Rennes in 2007, the NFC standard was implemented for the first time in a metro network by China Unicom in Beijing on December 31, 2010.
Other NFC vendors mostly in Europe use contactless payment over mobile phones to pay for on- and off-street parking in specially demarcated areas. Parking wardens may enforce the parking by license plate, transponder tags, or barcode stickers.
In Europe, the first experimentations of mobile payment took place in Germany during six months from May 2005 with a deferred payment at the end of each month on the tramways and buses of Hanau with the Nokia 3220 using the NFC standard of Philips and Sony.
In France, the immediate contactless payment was experimented during six months from October 2005 in some Cofinoga shops — Galeries Lafayette and Monoprix — and Vinci parkings of Caen with a Samsung NFC smartphone provided by Orange in collaboration with Philips Semiconductors for the first time, thanks to "Fly Tag.” It is the system allowed to receive audiovisual information like bus timetables or cinema trailers from the concerned services. From November 19, 2007 to 2009, this experimentation was extended in Caen to more services and three additional mobile phone operators — Bouygues Telecom, SFR and NRJ Mobile — and in Strasbourg and on November 5, 2007, Orange and the transport societies SNCF and Keolis associated themselves for a two-month experimentation on smartphones in the metro, bus and TER trains in Rennes. After a test conducted from October 2005 to November 2006 with 27 users, on May 21, 2010, the transport authority of Nice — Régie Lignes d'Azur — was the first public transport provider in Europe to add definitely to its own offer a contactless payment on its tramways and bus network either with a NFC bank card or smartphone application, notably on Samsung Player One — with the same mobile phone operators as in Caen and Strasbourg — as well as the validation aboard with them of the transport titles and the loading of these titles onto the smartphone, in addition to the season tickets contactless card. This service was experimented as well, then respectively implemented for NFC smartphones on June 18 and 25, 2013 in the tramways and buses of Caen and Strasbourg. In the Paris transport network, after a four-month testing from November 2006 with Bouygues Telecom and 43 persons and finally with 8,000 users from July 2018, the contactless mobile payment and direct validation on the turnstile readers with a smartphone was adopted on September 25, 2019 in collaboration with the societies Orange, Samsung, Wizway Solutions, Worldline and Conduent.
First conceptualized in the early 2010s, the technology has seen commercial use in this century in Scandinavia and Estonia. End users benefit from the convenience of being able to pay for parking from the comfort of their cars with their mobile phones, and parking operators are not obliged to invest in either existing or new street-based parking infrastructures. Parking wardens maintain order in these systems by license plate, transponder tags or barcode stickers, or they read a digital display in the same way as they read a pay-and-display receipt.
Other vendors use a combination of both NFC and a barcode on the mobile device for mobile payment because many mobile devices in the market do not yet support NFC.
QR code payments
QR codes 2D barcode are square bar codes. QR codes have been in use since 1994. Originally used to track products in warehouses, QR codes were designed to replace traditional 1D bar codes. Traditional bar codes just represent numbers, which can be looked up in a database and translated into something meaningful. QR or “Quick Response” bar codes were designed to contain the meaningful info right in the bar code.
QR Codes can be of two main categories:
- The QR code is presented on the mobile device of the person paying and scanned by a
point-of-sale or another mobile device of the payee.
- The QR code is presented by the payee in a static or one-time generated fashion, and it is
scanned by the person executing the payment.
Mobile self-checkout allows for one to scan a QR code or barcode of a product inside a brick-and-mortar establishment in order to purchase the product on the spot. Theoretically, this eliminates or reduces the incidence of long checkout lines — even at self-checkout kiosks.
Cloud-based mobile payments
Google, PayPal, GlobalPay and GoPago use a cloud-based approach to in-store mobile payment. The cloud-based approach places the mobile payment provider in the middle of the transaction, which involves two separate steps. First, a cloud-linked payment method is selected, and payment is authorized via NFC or an alternative method. During this step, the payment provider automatically covers the cost of the purchase with issuer-linked funds. Second, in a separate transaction, the payment provider charges the purchaser's selected, cloud-linked account in a card-not-present environment to recoup its losses on the first transaction.
Audio signal-based payments
The audio channel of the mobile phone is another wireless interface that is used to make payments. Several companies have created technology to use the acoustic features of cell phones to support mobile payments and other applications that are not chip-based. The technologies Near sound data transfer or NSDT, Data Over Voice and NFC 2.0 produce audio signatures that the microphone of the cell phone can pick up to enable electronic transactions.
Direct carrier/bank cooperation
In the T-Cash model, the mobile phone and the phone carrier is the front-end interface to consumers. Consumers can purchase goods, transfer money to a peer, cash out and cash in. A “mini wallet” account can be opened as simply as entering *700# on the mobile phone, presumably by depositing money at a participating local merchant and the mobile phone number. Presumably, other transactions are similarly accomplished by entering special codes and the phone number of the other party on the consumer's mobile phone.
Magnetic secure transmission
In magnetic secure transmission or MST a smartphone emits a magnetic signal that resembles the one created by swiping a magnetic credit card through a traditional credit card terminal. No changes to the terminal or a new terminal are required.
Bank transfer systems
Swish is the name of a system established in Sweden. It was established through a collaboration from major banks in 2012 and has been very successful, with 66% of the population as users in 2017. It is mainly used for peer-to-peer payments between private people, but is also used by church collect, street vendors and small businesses. A person's account is tied to his or her phone number, and the connection between the phone number and the actual bank account number is registered in the internet bank. The electronic identification system mobile BankID — issued by several Swedish banks — is used to verify the payment. Users with a simple phone or without the app can still receive money if the phone number is registered in the internet bank. Like many other mobile payment systems, its main obstacle is getting people to register and download the app, but it has managed to reach a critical mass and has become part of everyday life for many Swedes.
Swedish payments company Trustly also enables mobile bank transfers but is used mainly for business-to-consumer transactions that occur solely online. If an e-tailer integrates with Trustly, its customers can pay directly from their bank accounts. As opposed to Swish, users don't need to register a Trustly account or download software to pay with it.
The Danish MobilePay and Norwegian Vipps are also popular in their countries. They use direct and instant bank transfers, but also for users not connected to a participating bank, credit card billing.
In India, a new direct bank transfer system has emerged called Unified Payments Interface. This system enables users to transfer money to other users and businesses in real-time directly from their bank accounts. Users download UPI supporting app from app stores on their Android or iOS devices, link and verify their mobile numbers with the bank accounts by sending one outgoing SMS to app provider, create virtual payment addresses or VPAs which auto-generates a QR code and then sets a banking PIN by generating OTP for secure transactions. VPA and QR codes are to ensure easy use and privacy which can help in peer-to-peer transactions without giving any user details. Fund transfer can then be initiated to other users or businesses. Settlement of funds happens in real-time i.e., money is debited from payer's bank account and credited in recipient's bank account in real-time. UPI service works 24x7, including weekends and holidays. It is slowly becoming a very popular service in India and was processing monthly payments worth approximately $10 billion in October 2018.
In Poland, Blik is a mobile payment system created in February 2015 by the Polish Payment Standard or PSP company. To pay with Blik, you need a smartphone, a personal account and a mobile application of one of the banks that cooperate with it. The principle of operation is to generate a six-digit code in the bank's mobile application. The Blik code is used only to connect the parties to the transaction. It is an identifier that associates the user and a specific bank at a given moment. For two minutes, it points to a specific mobile application to which — through a string of numbers — a request to accept a transaction in a specific store or ATM is sent. Blik allows you to pay in online and stationary stores. Also, Blik can be used to make transfers to the phone or withdraw money from ATMs.
Comments