The technological innovation of the last few years has contributed to the success of smartphones whose functions have improved hand-in-hand. Now we do everything with our phones, including paying for purchases in store and online.
Mobile payments, also called m-payments, are payments made via mobile device, smartphones and, less frequently, tablets. We can identify two distinct cases of use for mobile payments: the first requires closeness between the seller and the buyer and, in this instance, we are talking about proximity mobile payments – or proximity payments - while in the second case, payment takes place remotely, which are defined as mobile remote payments. The most widely recognized platforms that offer this type of service are, for example, Apple Pay and Google Pay. We can also talk about proximity payments when we refer to payments using contactless cards. However, in this case, we are not dealing with mobile payments because it does not require the use of a device.
Often, these platforms offer both payment methods and sometimes hybrid user experiences. An example being Alipay, which among its payment methods allows the customer to pay by scanning a QR Code, shown by a POS (therefore in proximity) or on a display that could be anywhere in the world.
In order to pay via mobile, two essential elements are needed: a smartphone or a tablet and a certified platform that provides this type of service, which sometimes needs to be installed or can be already integrated in the device.
In order to make proximity mobile payments, you need to bring your mobile phone, which must be equipped with a NFC chip, close to a device that can receive and process the payment - typically a POS or a totem - or access the payment app and, depending on the user experience that is offered, finalize the transaction.
There are many mobile payment applications, each one with different payment methods. For example, Alipay enables the acquirer to create a payment QR code which can be scanned by the merchant with a bar code reader.
However, what does the merchant need? The answer depends on which mobile payment platforms you choose to accept. For the main digital wallets, the ones we have already mentioned previously, having an authorized POS is enough. This, therefore, offers more innovative solutions alongside the more traditional payment instruments such as credit and debit cards. Once the payment has been processed, the income from the sales will be credited to the current account.
For other instruments, like PayPal, it is necessary to set up an account into which funds will also be deposited. Some platforms have been created in pure digital mode for the world of Ecommerce and then have developed payment solutions in the physical world, instead more recent ones have been designed and created to immediately respond to the needs of omni-channel customers, who interact with the brands in a process that involves several touch points and different channels.
Mobile payments are being favored by the public nowadays all over the world, thanks to the increasingly spreading use of smartphones. They are the natural evolution of digital payment instruments which were introduced at the end of the 1990s, when Internet became a mainstream channel throughout the entire western world. However, over the last fifteen years, the payments world has significantly changed and this process has lately been accelerated by the COVID-19 pandemic. Our society is transitioning from cash to digital payments at a quick pace. As we saw in the article generational comparison on the use of payment methods, European Generation Zs and millennials have a clear preference for mobile payments and Ecommerce. Moreover, following the global trend of emerging mobile solutions, new digital payment solutions have entered the European market since 2005. A couple of note-worthy examples are mobile wallets such as Swish (in the Nordics) and BLIK (in Poland) and iDeal in the Netherlands.
From a global comparison perspective, the highest transaction value for mobile payments is reached in China with US$ 1,318,952m in 2021, followed by the United States with US$ 468,152 and the United Kingdom with US$ 97,615.¹
Many other nations in the world are experiencing a sharp acceleration in the use of these payments, growth which also depends on the strategies of the individual players in this sector - think of communities of Apple and Google users - and the extent of the propensity to use digital services. A penetration ratio may be the ratio between users of mobile payment apps and smartphone owners, which now exceeds 40% in Denmark, 36% in South Korea and Sweden and 27% in the United States.²
In line with the global trends, over 30% of Ecommerce payments in the UK in 2020 were made by digital or mobile wallet, with Apple Pay being the most used, closely followed by Google Pay. Moreover only 8% of retailers in UK do not offer mobile wallet payments as one of their payment methods.³ People are becoming accustomed to being given the opportunity to choose mobile payments as an option.
Among the main reasons people in the UK choose this payment method are that it is convenient, saves time, it takes away the worry to carry cash when out, it’s free and it is easier to keep track of finances that way. But the reasons continue: for example, many mobile wallets now offer reward points and discounts which can be useful for customers.³
Moreover, this market is only expected to keep growing in the future. Around a quarter of mobile users in the UK are predicted to make proximity mobile payments by 2023. In 2019 this proportion was at just over 19%.³
Therefore, if you still do not have this option in your business, it is time to jump on the bandwagon and make sure your customers can choose their preferred payment methods during check-out. This will build trust with your clientele and increase your sales.
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