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  4. Mobile Payments – See the Trees Through the Forest

Mobile Payments – See the Trees Through the Forest

February 21, 2012

by Per Holmkvist, Founder of mobile agency Mobiento

M-commerce is booming, and rightfully so. Shopping with or via the mobile phone is fast, easy and accessible. For retailers and brands it’s simple, just set up an “m-commerce solution” and… wait, we need a mobile payment solution. Google Wallet? Premium SMS? Square? Credit cards? Just don’t let the sheer multitude of options stop you from making money.

While attending a mobile marketing conference recently, I participated in a workshop on m-commerce design and user experience, but we ended up talking about mobile payments. It was really an apples-and-pears discussion, where no-one had an overall grasp of the topic. And this was a group of mobile industry insiders. So for people who do not focus on mobile every day, it is not any easier. While look and feel is important, the payment bit, the money making bit, needs to be understood as well.

Within m-commerce as a whole is the mobile payments market and it is soaring. Juniper Research expects it to grow to $670bn worldwide in 2015. And everyone wants a piece of the action. Solutions are being offered by every company that has even a remote connection to either mobile or payments. Mobile operators, media companies, banks, credit card
companies, mobile phone manufacturers, IT startups, you name it.

Some mobile payment solutions are aimed for large scale business, some for long-tail small scale business and some even person-to-person payments. Some are domestic and some are global. Some are charged to your bank account, some your credit card and some your phone bill. Some are for online shopping, some are for shopping in stores. Some are easy to implement, others are complex and take time. To add to this, not all alternatives are available or even possible in all countries.

This multitude of options is fantastic, but it is also a problem. Being a full service mobile agency, retailers and brands ask Mobiento; Which one is best for our business? Which one of them will be the winner, the eventual standard? This sometimes results in a wait-and-see-approach, which is really a pity. There is a window of opportunity right now to be a
first mover in mobile, while competitors are waiting.

The message to retailers and brands is - don’t let hesitation stop you from making money. Mobile payments may appear a dense forest, but there are really only a few main payment types, and they are quite distinct in terms of market, usage and provider. We have tried to clear some dead wood by creating the below overview. It is by no means exhaustive and its contents change all the time as mobile payment providers move into new segments and widen their offerings. But it is a great conversation starter. Tweet us @mobiento to let us know what you think.
 

Mobile payment type

Direct Operator (Carrier) Billing

Credit Card Payments

Mobile Wallets

App Store payments

Mobile Card Readers

Provider

Mobile operators (carriers)

Credit card companies (Visa,
American Express etc)

Media, Banking, Mobile operators, Paypal, Niche companies, and sometimes a Brand itself (Visa, Google, Starbucks etc)

App Store owners (Apple, Google etc)

Niche companies (Square, iZettle, etc)

Market

Digital goods; mobile content,
mobile tickets, donations, vending machines, TV-voting and other micro
payments.

Physical and digital goods. Anything purchased on-line via a mobile web site or app; clothes, books,
electronics, etc.

Any goods both off- and online.
However, much focus is on purchases of physical goods in physical stores.

Digital goods; i.e. app purchases
and in-app purchases from Apple Appstore, Android
Market etc.

Physical goods and services. Mainly
for small businesses (the sausage stand on the corner) and private market
(e g classified ads transactions).

How does it
work?

Buyer sends a premium-SMS or clicks a premium-link on a mobile internet (wap) site.

Just as on the fixed Internet. When
making a purchase in an app or on a mobile web site, buyer enters credit card
details.

When registering, the buyer enters
credit card or bank account. POS methods differ,
many involve a mobile app to connect with cash register (via NFC, QR ID etc).

Buyer enters credit card details
when creating an account. To be able to pay, user must give password. It is a
type of mobile wallet really.

Seller registers with service and
receives (free) credit card reader plug-in for smartphone. Buyer draws card
in reader and money is transferred.

Money
withdrawal

Purchase appears on the buyer's
regular phone bill / is withdrawn from prepaid card.

Purchase is charged to the credit card for each purchase.

Purchase is charged to the credit card or bank account for each purchase.

Purchase is charged to the credit card for each purchase.

Purchase is charged to the credit card for each purchase.

Transaction fee

30-50% (depending on operator,
amount etc).

2-4% (including transaction and
processing fees).

1-4% (depending
on how money is
withdrawn).

30% (Apple Appstore,
Android Market).

2-3% (plus small per transaction
fee in some cases).

Pros

Great reach, anyone can send an SMS.
Requires no pre-registration from buyer. Uses existing billing relationship,
no credit card necessary.

Solution familiar from Internet both for retailer and
buyer.

Quite simple to use once buyer has
set up account. Additional info like Loyalty points, Coupons etc be sent via the wallet/app.

Very easy to use once buyer has set
up an account. Works globally, international solution.

Enables small retailers to allow
credit cards, without traditional readers. Works for P2P payments. Easy and
safe for both buyer and seller. No cash risk.

Cons

Domestic solution, not International. Operators only allow small amounts and take large cut. Problem
to use it privately
if you have a corporate subscription.

Cumbersome to enter credit card
details on mobile phone keyboard. Perceived security issue to enter credit
card details for
each purchase
over mobile network.

Retailer often must implement
additional POS infrastructure. No market standard, there are many mobile wallets.
Only people with smartphone and app can use it.

Provider takes large cut. Only for
app and in-app purchases related to the app. Not as payment for physical
goods, services etc.

Not suitable for a large scale
business. Perceived fraud risk from buyers.