Mobile payment systems

Category: App costsMobile app ideas
Mobile Payment Systems NFC Premium SMS Mobile Web Payments Direct Mobile Billing

NFC, Direct Mobile Billing, Premium SMS, Mobile Web Payments.
Pros and cons of mobile payment systems.

The revolution that ubiquity of smartphones has made is doubtless. Alarm clock, watch, music player, GPS device, calendar and many more have been replaced with a single device: mobile phone. The trend is ongoing hence it’s no surprise that mobiles start to substitute traditional wallets and modern credit cards.
Mobile payment term refers to payment services performed via a mobile device such as smartphone. It enables you to pay without cash, cheque or credit card for both digital and real goods. We distinct four primary models for mobile payment technology:

  • Premium SMS
  • Direct Mobile Billing
  • Mobile Web Payments (WAP)
  • Contactless NFC (Near Field Communication)

The average online shopping cart abandonment rate reported by Baymard Institute is 67.91%. In order to boost mobile payment, you should better know your choices – mobile payment systems. There are many solutions, but always bear in mind that mobile payment security should always be your #1 priority.

Premium SMS

A consumer sends a payment request via an SMS text message or an USSD to a short code (a number shorter than an ordinary one) and a charge is applied to their phone bill or their online wallet. The involved merchant is informed about the payment success and releases the paid goods. Since customer’s data isn’t usually included in the message, this method is typically used for digital goods that can be sent back to the purchaser. It’s rather old-fashioned way of payment due to:

  • Poor reliability – messages may get lost
  • Slow speed – it can take up to hours for a transaction to be finalised. Nowadays people are picky and are not eager to wait more than few seconds
  • Rather-low security
  • High cost for entrepreneurs (operators take their slice of cake)
  • No bound with customer

The sum of these factors results in rather poor service that isn’t capable of taking significant share in payment market.

Direct Mobile Billing

Direct mobile billing basically means charging the purchase to a mobile phone account. The process is secured by two-factor authentication (2FA) which requires PIN (Personal Identification Number) and one-time password. It is the true alternative payment method as it doesn’t need any other item/device than mobile phone. It’s widespread in Europe and Asia thanks to:

  • Security – The two-factor authentication prevents fraud
  • Convenience – No pre-registration and no new mobile software is required.
  • Easy – It’s just another option during the checkout process.
  • Fast – Most transactions are completed in less than 10 seconds.
  • Proven – 70% of all digital content purchased online in some parts of Asia uses the Direct Mobile Billing method

Mobile Web Payments

The consumer uses specially designed web pages or previously downloaded mobile payment apps in order to make a payment. It uses WAP (Wireless Application Protocol) as underlying technology. This method is easy, quick and has overall good performance. What’s really important for vendors is the fact that this method links consumer specifically with their site/shop thus make a customer-seller connection which may result in next purchases in the future. However, Mobile Web Payment is just a mean therefore direct mobile billing, credit card or online wallet is still required.

Contactless Near Field Communication

NFC technology is designed to support physical transactions. A consumer using mobile phone equipped with appropriate technology waves their device near the reader. Sometimes a need for PIN input may occur. Its rather new technology that is still gaining attention, but many seem to believe in its ultimate victory in payment means competition. It is believed that by the end of 2015, five percent of the base of 600-650 million near-field communication (NFC) equipped phones will be used at least once a month to make contactless in-store payments at retail outlets. If so, than mobile payments are surely worth-tracking.

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