Reading: Mobile Commerce and Mobile Payment Systems

Photo of a smartphone screen, showing a screenful of online shopping options (e.g., Starbucks, Dominoes Pizza, etc.).

Mobile Commerce

The term mobile commerce was first coined in 1997 by Kevin Duffey at the launch of the Global Mobile Commerce Forum to mean “the delivery of electronic commerce capabilities directly into the consumer’s hand, anywhere, via wireless technology.” Many think of mobile commerce as “a retail outlet in your customer’s pocket.”

Mobile commerce is worth US$230 billion annually, with Asia representing almost half of the market, and it’s expected to reach US$700 billion in 2017. According to BI Intelligence, in January 2013, 29 percent of mobile users have now made a purchase with their phones. Walmart estimated that 40 percent of all visits to their Internet shopping site in December 2012 was from a mobile device. Bank of America projected that $67.1 billion in purchases would be made from mobile devices by European and U.S. shoppers in 2015.

Mobile Payment

Mobile payment, also referred to as mobile money, mobile money transfer, and mobile wallet, generally refers to payment services operated under financial regulation and performed from or via a mobile device. Instead of paying with cash, check, or credit cards, a consumer can use a mobile phone to pay for a wide range of services and digital or hard goods. Although the concept of using non-coin-based currency systems has a long history, only recently has the technology to support such systems become widely available.

Mobile payment is being adopted all over the world in different ways. In 2008, the combined market for all types of mobile payments was projected to reach more than $600 billion globally by 2013, which would be double the figure as of February, 2011. The mobile payment market for goods and services, excluding contactless Near Field Communication or NFC transactions and money transfers, exceeded $300 billion globally in 2013. Investment on mobile money services is expected to grow by 22.2 percent during the next two years across the globe. It will result in revenue share of mobile money reaching up to 9 percent by 2018. Asia and Africa will observe significant growth for mobile money, with technological innovation and focus on interoperability emerging as prominent trends by 2018.

In developing countries, mobile payment solutions have been deployed as a means of extending financial services to communities known as the “unbanked” or “underbanked,” which are estimated to represent as much as 50 percent of the world’s adult population, according to Financial Access’s 2009 Report “Half the World is Unbanked.”

Forms of Mobile Payment

Apple Pay is a mobile payment service that lets certain Apple mobile devices make payments at retail and online checkout. It digitizes and replaces the credit or debit magnetic stripe card transaction at credit card terminals. The service lets Apple devices wirelessly communicate with point of sale systems using a near field communication (NFC) antenna, a “dedicated chip that stores encrypted payment information” (known as the Secure Element), and Apple’s Touch ID and Passbook.

The service keeps customer payment information private from the retailer, and creates a “dynamic security code [ . . .] generated for each transaction.” Apple added that they would not track usage, which would stay between the customers, the vendors, and the banks. Users can also remotely halt the service on a lost phone via the Find My iPhone service.

Google Wallet is a mobile payment system developed by Google that allows its users to store debit cards, credit cards, loyalty cards, and gift cards among other things, as well as redeeming sales promotions on their mobile phone. Google Wallet can use near field communication (NFC) to “make secure payments fast and convenient by simply tapping the phone on any PayPass-enabled terminal at checkout.”

Where this new technology will lead the world economy and what its impact on the existing monetary system will be remain to be seen, but we are certain it will continue to evolve rapidly!