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By Koh Kwang-bum
A cashless economy is the future vision of the mobile payments industry. With the rapid growth of smartphone ownership all over the world, this vision is becoming a reality faster than expected.
But it is the consumer experience when paying for goods and services using their smartphone that will really tip the scales. The key is making it seamless, compelling and secure. Then sooner or later, users will vote with their fingertips.
The last five years have seen the emergence of a range of mobile payment technologies either as test beds or operational systems.
But which companies are setting the pace in the mobile payment sector? Which of the technologies currently in use are most likely to influence the way we do transactions in the future? And how is design-led thinking influencing the creation of innovative mobile payment technologies?
Smartphone, smart money
Every day, billions of consumers around the world pay for something — travel, food, entertainment, clothing, healthcare, insurance and more — either in person or electronically. Aggregated over time, paying is an activity that occupies a huge amount of time and attention.
The age where the ritual of paying for things could become completely seamless, or even disappear altogether, is fast approaching, thanks to numerous technical and business advances.
With the introduction of electronic money, swipe payment systems and online transactions, paying has become faster, more secure, and more flexible over the last 50 years.
Now payments can be handled completely in the background — saving time for billions of customers, and making retailers smarter, as their knowledge about customer preferences and behavior grows hand in hand with that of the smart payment infrastructure.
‘Paying' like never before
Emerging mobile payment technology is taking us into a new phase where payments by mobile devices become infinitely more diverse, personalized and attuned to individual lifestyles.
Soon, instantaneous and customized mobile payment systems will not only free consumers from the ritual of buying things, but also create entirely new ways to buy and sell products and services.
Mobile payments are also creating the freedom to circulate or allocate money to friends, different accounts or financial products.
Consumers and businesses are beginning to experiment with technologies that provide a variety of payment options—faces, fingerprints, physical gestures and through social media, for example.
At the heart of this incredibly creative period of change is a growing recognition among financial services providers that they must deliver a highly compelling user experience — one that is intuitive, effective and puts the consumer in the driver's seat.
Transforming consumer journey
To give consumers a compelling experience, service providers are putting in place a number of mechanisms such as speeding up the payment process by removing queues, enhanced security, allowing consumers to have a better understanding of their own spending patterns and behavior, and much more.
Merchants are in the process of adopting mobile payment systems to democratize retail, which will give flexible payment options to small and large businesses. They are also analyzing consumer data to gain insights that can drive efficiency and profits.
This is important for reducing cost by having lighter and smaller payment infrastructure. Furthermore, it enhances customer services by freeing resources from the mundane action of payment and offering a more personalized shopping experience.
Trends setting pace
A number of companies and technologies are breaking new ground in mobile payments, with the potential to transform our daily lives. They are paving the way for an efficient and enjoyable shopping experience, providing merchants and consumers with better ways to charge and to pay.
Though it is still in the early days, the age of seamless payments is coming. Companies taking a "consumer first" approach to their user design and mobile payment strategy today will be well positioned in this cashless economy.
Companies are also making an effort to provide simpler, faster online shopping experiences to customers.
A Swedish company operating in north European markets has radically streamlined the process of paying for online purchases. It has also launched a mobile version of the payment system to facilitate instant payments for on-demand services or goods that consumers require immediately.
By creating a database of retailers and business users, the company acts as a conduit for payments to them and aggregates monthly payments into a single invoice for service users. This removes the need for online retailers to secure credit card details.
Creating an instant payment universe is also a direction taken by some of major players around the world who are launching into mobile payment sphere. Apple has already pioneered a seamless payment system in its own stores through EasyPay.
This system enables customers to pay at Apple Stores by opening up the EasyPay app and simply scanning and buying any item with their phone. The good news is that many retailers can offer a similar seamless payment or coupon transmission service to customers who have the iBeacon app on their iPhone.
Similarly, creating a ubiquitous mobile-first payment brand has become another key trend in the market.
PayPal has become one of the most ubiquitous online and mobile payment brands. Its power lies in the reach it has established among massive retailers right down to small online boutiques.
In restructuring its future business, PayPal is guided by two principles: simplicity and mobile first.
The sheer scale of PayPal ensures that it will have a powerful influence over the evolution of mobile payment technology.
PayPal is furthering its push into brick and mortar stores through a new product, Beacon, an add-on hardware device for merchants that leverages Bluetooth technology to provide a better customer experience, including paying completely hands-free.
Companies are offering innovative features not typically associated with online banking, such as social media integration, responsive design for mobile devices, real-time customer service, gamification and video content. This approach to consumer banking is radically different from traditional banking and truly customer-focused.
Mobile payment in Korea
Although we are living in a world where smartphones can replace thick wallets, in reality our wallet is still packed with different credit cards.
The history of Korean mobile payments market already reaches 10 years. Yet, the mobile payments system is still new to Korean users, who are well known to be tech-savvy.
Numerous market participants tried to develop technology and offered convenient services, however none really had a noticeable success in this field.
The number of mobile wallet subscribers has exceeded 10 million users, however most people end up maintaining their membership only, collecting points or using cash-back services instead of utilizing the mobile payments function. Why aren't people using mobile payments services in Korea?
The main reason is the lack of card readers that can accept mobile card information, thus users are unable to experience convenient mobile payments services.
The shortage of card readers is not simply a matter of cost. Rather, it's a perception issue; market participants do not have confidence in mobile payments market's growth potential and its technical solution.
Some people underestimate the necessity of mobile cards, saying that Korea's plastic card payment system is very convenient.
However, fundamentally, the lack of mobile payments infrastructure hinders mobile payments service innovation to attract more users.
This argument may be supported by the high usage of mobile membership card systems that replaced traditional membership cards.
In this situation, introducing various mobile payments services that lack compatibility will only confuse users. Then how can the mobile payments market be vitalized?
In Korea, there are limits for one company to establish a mobile payment platform leadership, since the barriers are high in securing initial market formation.
The Belgian market approach, which expanded the market by establishing an open payment platform through leading corporations' collaboration, is more realistic as it can build market confidence regarding payment solution.
We expect that financial, telecom and retail companies in Korea will initiate cooperation in establishing the mobile payment platform.
Along with the private sector's cooperation, the government's support and guidelines are much needed in structuring the mobile payment ecosystem operation framework.
From vision to reality
While the mobile payment industry is still in its infancy, things are about to change. The coming years are likely to see the technology and business mature with ongoing innovation and, of course, increasing consumer adoption — mobile payments are likely to be a very big battleground.
However, the success of mobile payments will be influenced by three factors.
First is the extent to which financial service companies and technology providers collaborate to define a common roadmap.
Second is the rate at which mobile payment technologies can adapt to consumer demands for simplicity, timely service and security.
And lastly, it will depend on creating opportunities for individuals and micro-retailers to sell to consumers when the opportunity arises, with few or no restrictions.
Brands or services with established reach and trust-based customer relationships will be most likely to succeed. Newer entrants, however, with technologies that dovetail perfectly with customer lifestyles and circumstances, have the potential to disrupt markets.
Koh Kwang-bum is managing director of Accenture Korea.
