A guest post by Tim Murphy, Keynote Systems senior marketing manager
What items do you need in order to leave the house each and every day? Five years ago keys, watches, cash, credit cards, debit cards, pens, business cards, and identification lined the pockets and purses of most working professionals.
Today, the smartphones and mobile devices have taken its place among our daily artillery.Smartphone sales have now surpassed PC sales and users are continually demanding that their smartphones do more. With this rapid growth in the mobile industry, is clear that businesses must now accommodate customers who, for convenience, want to exchange funds, make transfers or purchase retail with their mobile device.
Conducting transactions with a mobile device are just beginning to take off in the US, where companies like Starbucks have had more than 26 million transactions.
Mobile transactions are already very popular in more developed countries within Asia and Europe where differences in both culture and pricing have shaped a more rapid adoption of mobile technology. The good news is that other markets have demonstrated several proven strategies for companies that want to offer a mobile option to their customers. Each strategy presents a unique opportunity along with a set of challenges that need to be addressed and can be used for the further adoption of mobile payments throughout the United States.
For most mobile enterprises, partnering with a company that offers a payment engine is the best bet for smooth entry into the market. eBay, for obvious reasons, uses PayPal’s mobile app to support mobile purchases. Additional popular payment engines providers include Zong, Boku, Obopay, Mint and Amazon TextPayMe.
As a testimonial to the heat of the market, a market research study by Mind Commerce Publishing, recently published that the value of financial transactions made via mobile phones is forecast to rest at $245 billion worldwide by 2014. Besides mobile purchases, just about every major payment engine makes it possible for the user to transfer money from mobile phone to mobile phone–thus replacing cash on person-to-person, as opposed to person-to-business, transactions.
There are five basic techniques that are commonly used for mobile payments:
- SMS-Based Transactional Payments (custom system like PayPal)
- Direct Carrier Billing: a premium SMS subset of SMS-based transactional payments
- Mobile Web
- Mobile App
- Near Field Communication
Each has a different usage model, thus a company will want to evaluate all four to determine the best solution for its particular needs. To make sure that customers stay satisfied, there’s additional information to be considered.These are simple to set up, and becoming broadly used and accepted. SMS-based transactions can be used to purchase products or services and for person-to-person cash exchange.
For example, with PayPal, you can send a text message containing appropriate keywords (such as “pay [mobile number] 10”) to a PayPal Shortcode. That triggers a specific transaction (i.e. send $10 to the person at the mobile number). If you don’t know the specific keywords you need, you can send help and find out what commands are supported. In either case, the transaction is completed with a transaction confirmation.
The challenge with SMS-based transactions is that they require the use of an aggregator to support the short code–an additional partner the owner of the service has to manage. Despite your lack of control over the partner, your users will hold you responsible for availability and performance. It is prudent to know your partner. Is the service reliable? How often are messages dropped, or delivered with a long delay? A clear QoS agreement is a must, as well as regular monitoring of the service to ensure a quality user experience.
Direct Carrier Billing is a type of SMS-based transactional payment that is more typical in countries with a dominant carrier. The charges for goods and services are considered Premium messages and go directly to the customer’s monthly bill. From the enterprise perspective, all transactional and collections costs are picked up by the carrier, but don’t think that they’re free.
Direct Carrier Billing provides ease of use—especially for smaller transactions. For example, in Sweden a user can buy a bus ticket via SMS by sending a text message requesting an adult or youth ticket. In a few seconds a message comes back with information the bus driver needs in order to confirm that the message contains a valid ticket.
After showing the message to the driver when boarding the bus, he or she saves the message, just like an ordinary ticket. In countries such as the US, with multiple carriers in play, the main barrier to adoption may be the complexity–each service (bus tickets, parking fees, etc) would need to strike a deal on a carrier by carrier basis.
Nonetheless, Direct Carrier Billing has promise since just about any mobile device can send an SMS, although the costs can be high–with the carrier holding up to 30% of the revenue collected. Monitoring this service is necessary to ensure that the service responds in a timely manner.
Long delays in message delivery would inhibit the adoption of SMS service for near real-time transactions. It is necessary to be able to prove to the end user, and to the contracting company, that the service has accurately collected data and billed transactions. Typically this is a downsized version of your Internet desktop experience. It can require considerable redevelopment of your site to reflect the strengths and minimize the challenges of the smaller format and slower transmission rates of mobile devices.
To make a payment, you navigate to the proper mobile Web page for the service, enter in credit card number details and the payment is sent. If the service is outsourced to a partner and the site and content are hosted externally, you have the same challenge—with the same opportunity for resolution—as with SMS-based transactions.
Sometimes the owner of a service has another partner who manages and implements it, adding more complexity. Monitoring the user experience is critical to ensure that your users are getting the service levels defined within your contract.Smartphones have made mobile Web much more popular, but your audience demographics will determine its benefits.
A generation or two of younger users, along with smartphone users and techies, are highly comfortable with mobile Web, while many people still resist working with Web pages on a tiny screen.Mobile apps as a payment platform have many similarities to the mobile Web experience and require many of the same considerations if that’s the strategy you adopt.
They’re an improvement on the Web if you want personalization and to eliminate the need for Web navigation to get to the point of sale.
However, you may need to create and maintain several iterations of your application to address a fragmented smartphone market. If customers are not going to use it repeatedly, the App store discovery and the download process may not be as quick as firing off a simple text or going to a Web page.
If your app platform is outsourced to a partner you need to monitor the user experience to manage the service levels objectives and standards. Monitor that your customers can go through each payment step and that functionality is working right on the backend as well.
Near field communications is more popular overseas than in the US at this time. In Japan, for example, Near Field Communication (NFC) is allowing consumers to use their mobile phones instead of a credit card to make payments for virtually everything. A tiny chip is embedded in the mobile phone that makes the transaction possible—whether you have a carrier signal or not.
Unfortunately, NFC requires the deployment of readers that are within a couple of feet of the user’s device. Moreover, if your target market doesn’t own NFC-capable devices you’ll need to consider other strategies. NFC may be the technology of the future,but if the hardware isn’t in place it may not make sense.
Perhaps the greatest challenge today, as you develop strategies to adopt mobile payment technology, is that there is no universal system. Your users want the convenience, security and freedom that a mobile device can offer and you may have to offer multiple solutions.
Will there be unification of mobile payment services at some time in the future? Perhaps. But, by that time mobile may also deliver solutions that let you leave your car keys and identification at home as well. In the meantime, freeing your customers from the need to carry their mobile wallet could be the wave of the future. Consumers won’t confidence to leave the plastic at home unless the quality of your service meets their needs, and closely monitoring your mobile payment solutions is the way to do it.
Keynote Systems says it is a global leader in Internet and mobile cloud monitoring, testing and performance monitoring.
Tim Murphy is a Sr. Marketing Manager for Mobile Quality at Keynote Systems with 20 years of experience in marketing of telecommunications, financial service and retail in both the US and abroad.
