Mobile Payment

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Mobile payment has been a niche which economic analysts have been expecting to explode for some time. But with the recent launch of Apple Pay, the mobile payment system included in the recent iPhone 6 smartphone, the rise of mobile payment is really expected to get underway. The Apple Pay system is compatible with NFC (Near Field communication) Technology, and given the success of Apple products it seems inevitable that its launch will contribute to an accelerating mobile payment market. Both the iPhone and Apple’s iPad tablet computing range are market leaders in terms of sales.

At the same time that Apple is launching its own mobile payment system, a new mobile wallet has also been announced by a consortium of US retailers. MCX, a collaboration of 70 of the largest retailers in United States, announced the development entitled “CurrentC” just days before Apple unveiled Apple Pay.

Both of these developments are indicative of a new breed of applications which completely bypass the payment terminal by enabling consumers to make in-store purchases solely with mobile devices such as smartphones.

Mobile payments to grow at 154 percent rate

According to a new report authored by Business Insider, mobile in-store payments will grow at a five-year compound annual growth rate of 154 percent, reaching $189 billion in 2018, from the relatively paltry level of $1.8 billion in 2013. Other estimates are even more dramatic; a study conducted by the Pew Research Center’s Internet & American Life Project and Elon University’s Imagining the Internet Center predicted that both cash and credit card payments could have been phased out completely by 2020.

Yet this is still very much a developing market. Mobile payment is not broadly used even in the most technologically-savvy countries; just 6 percent of US adults have currently made a payment in-store by scanning or tapping their smartphone at a payment terminal. While this figure is highly likely to rise in the near future, it does illustrate that this technology has a long way to go before it is embraced by mainstream society.

Demographic issue

However, the Business Insider study also reveals that ‘millennials’ aged between 18 and 34 are far more likely to use this technology than anyone else. Of those surveyed, 55 percent of people who use mobile wallets can be classified as being from the millenial group. Other strong indications of the future of this technology were given by the fact that a majority of US tech consumers indicated that they would “absolutely” use Apple Pay once it becomes active (this was officially confirmed by Apple on 16th October).

The fact that Apple Pay is an NFC-based system also indicates that this particular technology is set to rule the roost of mobile payment. Apple supporting this technology would seem to sound the death knell for all the competing systems, such as QR codes and barcodes.

As Apple’s announcements helps generate momentum in the mobile payment sphere, a new solution is also being launched in the UK. Zapp will enable British shoppers to pay with their mobile phones in major retailers across the country, including the supermarket chains Asda and Sainsbury’s, and the Department store House of Fraser. Zapp will launch next year, as mobile payment continues to become a more established technology.

Privacy, security and personalisation

However, issues remain with regard to the uptake of mobile payments. As more people use such systems in conjunction with mobile banking, the collection of personal data will inevitably grow. Given that people are concerned about both security and privacy, addressing these issues must be a central consideration for developers of mobile payment systems going forward.

This is why Apple have included a number of safety features within Apple Pay in order to address the concerns of consumers. However, the issue of personal data should not be viewed as an entirely negative one, as many consumers will be willing to relinquish some elements of personal data in order to receive a more personalised customer experience.

Numerous surveys have underlined both this privacy concern and also the importance of marketing material to the individual rather than generically. According to a recent EMarketer survey, 60 percent of US Internet users were more concerned about how companies protected personal data than they had been 12 months ago. Additionally, more than three in four US Internet users indicated that they were only willing to purchase from companies that they trusted. These two figures indicate that forming a bond with consumers is essential for retailers, particularly with a potentially controversial technology such as mobile payments.

But other statistics imply that the notion of privacy is a two-way street. Consumers are continually seeking personalisation and to be addressed in a direct fashion, and conversely this means that many are willing to actually forego some aspects of their privacy.

For example, the technology company Jainrain found in a 2013 survey that seventy-four percent of online consumers become frustrated with websites which are comprised of content unrelated to their interests. In accordance with this, the cloud computing company Monetate found that exactly three-quarters of consumers have no objection to retailers utilising personal information to improve their personal customer experience.

The message for retailers and marketers is really that mobile payment has great potential, but in order to fully engage consumers with it, the technology must be presented in a way that is considered both secure and personal to the individual.

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