42 Giffard Road, East Cantonments, Accra – Ghana. Digital Address GL-055-6818
+233302773273, +233302785538.

The Mobile Payment Landscape; Players, Platforms and Strategies (Demo)

What makes mobile payment services different from mobile banking services and mobile money in general?

Mobile banking provides customers access to traditional banking services such as accounts opening and operations, transfer, airtime purchase, and payment on their mobile device. As mobile banking has been primarily driven by banks, a bank’s mobile app is the best example of a mobile banking service at work.

Mobile money is an electronic wallet service which allows users to store, send, and receive money using their mobile phone. The most popular example of this is Kenya’s M-PESA by Safaricom. The extent to which Fintech start-ups and Telcos have been able to provide these services is dependent on the regulatory requirement in their market. For example, Kenya’s Safaricom has partnered with Equity Bank (also from Kenya), to be able to expand beyond mobile money to a mobile banking service called M-KESHO.

Understanding how mobile payment services differ from mobile banking mobile money services and mobile money can be a little tricky. Simply put, a mobile payment service makes it possible to use a mobile device (such as a phone) as cash or card to make payment for a product or service in a transaction. This can be via physical contact using NFC, proximity-based using Bluetooth and RFID, or remotely using an app or browser on the mobile device.

In a country with a well-developed mobile payment ecosystem like China, one can confidently go out to conduct all business transactions without having cash or a card as long as one has a mobile phone. From paying for breakfast, transportation, to paying for purchased goods, all payments are made from one’s mobile device.

The ability to make this clear distinction about what constitutes a mobile payment service is key to understanding its uniqueness, the opportunities it presents, and challenges.

The mobile payment landscape is slightly unique. While the players that have been cited as examples have the capability to offer mobile payment services (and some are doing so already), mobile money has been an open field with a more diverse set of players. These players include original equipment manufacturers (OEMs), payment processors, retailers, and internet companies. Also included are social networks, chat apps, and e-commerce firms.

Players from the OEM sphere include Samsung with SamsungPay, Apple with ApplePay and Google (the maker of the Android operating system and arguably an OEM in its own right) with Android/GooglePay. These alongside other counterparts are classified as Wallets.

These services primarily rely on near-field communication (using an NFC chip embedded within their devices to transmit signals) such that once the device is held close to a card reader, it transmits signals for payment to be made. Each of these players has gone further to improvise on this to make contactless payment possible. Of all the three, ApplePay (with the head start of launching first) remains the most popular of all.

The strategy of these players is obvious, they bank on the penetration of their hardware and software. In the case of Google, in order to provide mobile payment as a value-added service (that goes beyond payment for individuals), they offer some incentives such as loyalty and reward points to small businesses.

Mobile payment services from payment processors include Masterpass from MasterCard, mVisa from VISA, Quickteller from Interswitch, and mCash from the Nigeria Inter-Bank Settlement System (NIBBS). These services are implemented using unique codes for each integrated merchant. This can then be processed as Scannable QR codes (when at the merchant’s location) or as USSD when physically present and away. Solutions such as Quickteller go further to provide a mobile and web app for making payments directly from one bank account to another directly.

Based on their role as payment processors, the services they offer come with an entry strategy that is heavily reliant on interoperability across financial service providers and the convenience offered to the users. This makes it possible for them to provide a collection platform to merchants as customers of banks that these processors already serve, without the need to worry about compatibility. Since they rely on basic technologies such as USSD and QR codes that can be scanned by cameras therefore, the convenience of use is sold as a major advantage to the end users.

Retailers (banking on the volume of trade and the number of customer walk-ins of these payment processors) have also successfully ventured into mobile payment services. Prominent players in this space include Starbucks (the world’s largest coffee chain, now collecting 30% of its revenue from mobile payment services) and Walmart, whose WalmartPay is now seen as a strong contender to ApplePay and GooglePay in the US. These solutions have primarily been implemented with a mobile app. The customer’s card is linked to this app on registration and the user can then scan QR codes with this app at physical stores for making payments.

E-commerce companies implement a variant of this mobile payment solution as a feature to their e-commerce service, and optionally a mobile app, provided they want to open it up as a mobile payment service for other merchants. Examples of this include AmazonPay, KongaPay and AliPay, which is also available as a mobile app.

Beyond convenience, a key strategy used by retailers to drive their mobile payment service is the promise to save users time and money. These apps are also used as a platform to push offers, rewards and manage loyalty programmes.

Social networks are today leading the socialisation of payment, with WeChat’s WeChat Pay from Tencent and Facebook’s Facebook Pay. These apps which made us connect with friends are making it possible for us to do business with them, and are also making it possible for small businesses to connect with their customers. In addition, these social mobile payment apps fundamentally implement a peer-to-peer model of money transfer, making it easier for users on the platform to transfer money to each other. For example, WePay also uses QR code for processing payment with merchants. In addition, these social mobile payment apps make it possible for users to make payments in apps they are already familiar with. They make it possible for businesses to engage with their customers on a social level, hence their widespread adoption.

It is worthy of note that a couple of fintech companies have merged the different technologies used by these players to create mobile payment solutions for their home market. An example of this is Nigeria’s Unified Payments, with the product, PayAtitude. This product uses a combination of Chip+PIN based on NFC technology. Also in place is a mobile app that can be linked to the user’s bank account. Chase Bank is an example of a few traditional banks that are also major players in the mobile payment service space, with its ChasePay solution, based on NFC technology.

What is the future of mobile payment services? Though a couple of predictions point to the socialization of payment, it may not be the best of ideas to make a bet on an approach or technology from one of these players. Rather, what should be expected and encouraged is the integration of different technologies. The biggest bet, for now, would be on providing the infrastructure required to make an ecosystem of mobile payments services thrive and also inter-operate with one other. Users and merchants can then have a mix of options to select from based on convenience.

 

 

 

 

 

Sources:

 

https://www.mcash.com.ng/

https://en.wikipedia.org/wiki/Amazon_Pay

https://www.changingseasonsfcu.com/apple-android-and-samsung-pay/

https://www.geekwire.com/2017/mobile-payment-now-accounts-30-starbucks-transactions-company-posts-5-7b-revenue/

https://www.computerworld.com/article/3014275/mobile-payments/walmart-pay-gives-retailer-strategic-advantage-building-off-existing-app.html

https://medium.com/@charliecliu/everything-you-need-to-know-about-alipay-and-wechat-pay-2e5e6686d6dc

https://en.wikipedia.org/wiki/M-Pesa#History

https://www.worldremit.com/en/faq/mobile-money

 

Leave a comment