Are you holding the future of payment system?

Apple Pay used by a customer to make a payment

After the introduction of the Apple Pay in Apple's Sept 2014 event, if you had noticed a little more closely you would have seen that no one ever mentioned that Apple Pay was revolutionary or something that is entirely new. In fact it was one of those topics that was not mentioned a lot about in the newspapers and moreover the world was curious to know about the iPhone 6 (and/or 6 Plus) and the Apple Watch. The reason why it was ignored was Apple was not the first major player to get into mobile payment system. Apple can be said as the fourth major player who has entered the game but Apple has come up with some good solutions that will push the customers who are just on the verge of adopting the mobile payment technology.

Over the years, Mobiles have replaced calculators, cameras, torch, watches, compass, voice recorders, video recorders, music players, telephones, pagers etc., If you think about it, these are not just items replaced but industries, so let that sink in. Now where are we in this cycle of replacement? Some experts say that the mobile payments are the next stage where the Mobiles will replace your wallets. Now this mobile payment system can be a little confusing. As in how does it work? Who will use it? Why should we use it? What will we do with our debit/credit card? and so on. So let us understand about mobile payment systems a little and then the top companies in this space.

Mobile Payments

Mobile phones can be used either by consumers or by businesses (mostly small) to transact money. Even though all the mobile payment systems transact money, the main flow of transaction differs in both the cases and this leads other factors to be considered. Usually if business use Mobiles for transactions it would be as the Mobile Point of Sale (mPOS) system. In this case the Mobile phones help in creating a "Credit Card Terminal" at any place. This will help the retailers collect the transaction amount using Mobile Phones instead of a Credit Card reader. The Mobile phones will have some way to read the card or enter the card details and then will help in the transaction of payments. For example, a DVD retail shop can use a mPOS system instead of a Credit Card Terminal, which is costlier involving a high startup cost plus additional fees. So in these cases a mPOS system proves to be a better option. In this area Square and PayPal Here are the major players.

When consumers use their phones to make a payment it is to provide the money that they owe to the retailers or vendors. We do this every day in our life and these transactions need to seamlessly happen for all the customers. Now the companies are starting to understand the value in this and are creating different ways to make that happen. To put it in a simple way, in the beginning we were transacting using traditional currency. We paid the amount that we owe to a retailer by cash and we still do. Then we started using Credit Cards and Debit Cards to pay. Now the next stage of the evolution is to pay using your Mobiles. After all this evolution is to make us carry few things and spend more on products. Apple Pay and Google Wallet are some important players involved in this space.

A couple of factors need to be understood and taken care in the new system for the Mobile phones to truly replace our "wallets"

1) Transactions should be smooth and done easily
2) Future data must be at least as secure as current transaction data
3) Additional costs involved must be as minimum as possible
4) Needs to be more convenient than the current system
5) Provide additional benefits than current system
6) Both consumers and retailers need to adapt the system
7) Must be more theftproof

As Apple mentioned when it introduced Apple pay, "the new payment system must be easy, secure and private" and with advantages. The current Mobile Payment systems, mainly Apple, Google, Paypal and Square each has a focused on solving the above caveats and pushing for adoption. In the follow up post we will see how these companies solve these issues, their strengths and finally the hurdles in adoption of the system by both the consumer and the retailer.