Mobile payments are a convenient way to pay for goods and services without having to reach for your wallet or purse. They also offer enhanced security as nobody can see your credit card information when making a payment.
The mobile payment market is competitive with established players and new entrants. Banks face pressure from telcos, while other companies, such as public transport providers, aim to build their own mechanisms.
1. Increased Convenience
Mobile payment apps allow customers to pay for goods and services with their smartphones or smartwatches without the need to carry cash or credit cards. This is convenient for the customer as it means they can shop quickly and easily, while businesses can benefit from increased engagement rates.
The Covid-19 pandemic also drove up in-store mobile payments as consumers became apprehensive about handling cash or wiping down their cards with hand sanitizer and instead opted for more secure contactless payments. This is why retailers and well-established brands with high levels of consumer trust such as public transport companies are looking at developing their own mobile payment mechanisms rather than relying on specialist payments providers.
However, recent research from a number of countries shows that consumer trust remains the key factor when choosing a provider for mobile payments. In the UK and USA, this is considered more important than the convenience of the service – perhaps suggesting that it takes time for new entrants to gain a critical mass of trust.
2. Enhanced Security
In the wake of many high-profile data breaches and cybercrime, mobile payment technology has seen heavy bolstering in its security. This includes encryption processes, two-factor authentication and tokenization.
For example, many mobile payment services require a password or PIN number to open an account, and they only send your bank information over secure networks (like a private cellular network or VPN). Some also add biometric authentication features like a fingerprint or facial scan to keep your accounts even more safe.
Additionally, it’s a good idea to maintain your devices with the latest software and updates to prevent hacking. You should also use a secure Wi-Fi network and stay away from unsecured apps and websites. It’s also a good idea to check your transaction history on a regular basis for suspicious activity. This will help you catch any fraud before it gets out of hand. Using these precautions will make mobile payments just as safe as, or perhaps safer than, traditional credit and debit cards.
3. Convenience for Businesses
Using mobile payments, customers can easily complete transactions without needing to reach into their purse or wallet. In addition, businesses can benefit from enhanced security by ensuring that only the intended recipient has access to sensitive information.
The Covid-19 pandemic drove consumers to prioritize contactless payment methods, which is where mobile payment excels. It also provides an opportunity for brands to gain brand loyalty by offering a retailer-specific mobile payment mechanism.
However, a significant number of respondents value “Knowing the provider is trustworthy” above convenience when it comes to mobile payments (figure 9). This means that traditional banks have an advantage over specialist mobile payment companies – which could be eroded by continued media attention on banking failures. Additionally, telcos and other established transaction-based players feel they have a solid foothold in the market. This has resulted in them driving technology choices, controlling parts of the value chain and pocketing a large share of profits.
4. Increased Customer Satisfaction
Mobile payment technologies offer a convenient, safe and secure method for making transactions. This allows individuals to complete a transaction wherever they are, whether online or at a point of sale (POS). Businesses can use mobile payments to speed up checkout processes and to capture impulse buyers who might otherwise be turned away due to long queues.
While banks have a head start on the payment services landscape, they cannot rest on their laurels. Consumers are willing to work with new entrants to deliver mobile payments, and the evidence suggests that they have high expectations of their providers. This is demonstrated by the fact that respondents in our research placed high importance on “Knowing the provider is trustworthy”, compared to only 30% for “the convenience of the service”.