The mobile payments industry is developing rapidly. Increasingly integrated within the global economy, the ability to make mobile payments brings traditional players in the payments industry (such as financial institutions operating as merchant acquirers) together with retailers, mobile network operators (MNO) and other technology suppliers.
The industry has also seen a number of new entrants into the market (such as device manufacturers) who seek to embed facilitating technology within mobile hardware with the object of driving up hardware sales volumes.
Given the potential of mobile payments to stimulate commercial activity generally, the value of mobile payments globally is now projected to reach US$5.3 trillion by 20201. Precipitated by consumer expectations as well as investment from established technology providers and new entrants, we are witnessing unprecedented change in the payments ecosystem.
Mobile common denominator
Mobile payments is a broad term that encompasses a range of models with one common denominator: the use of a mobile phone. As mobile payments solutions evolve, there is a corresponding growth in the number of mobile payment mechanisms and platforms available in the market. There is also increased availability of value-added services (such as the ability to use the billing function of a mobile phone contract to pay for goods and services, and the hosting of vouchers or loyalty incentives on mobile phones).
Mobile payments solutions are typically made up of software and a database, both of which are installed on a smartphone. The database is usually embedded on a secure part of the SIM or on a secure segment of the mobile payment app, and stores the customer’s shipping, billing addresses, security and expiry date data for the customer’s credit card.
A range of models
The software and the database interact to facilitate a mobile payment. This can occur by the SMS model (which is the prevailing mobile payments model offered in geographies with a basic network) or by a mobile wallet model (which deploys contactless or NFC technology that facilitates “tap and go” payments in geographies with 3G or 4G networks).