Charles Small has managed multiple market research projects for companies considering establishing high-tech projects, including in-depth analysis of payment habits. For a free consultation, email Charles at: charles@csmall.co.uk
Opportunities for payment service providers are phenomenal. There were an estimated 358 billion non-cash global transactions in 2013, and the World Bank predicts the global value of remittance payments alone will reach US$681bn in 2016.
Just as inadequate internet infrastructure incentivised the mobile payments revolution in East Africa, high-cost payments to intermediaries in traditional transfers encourage use of new payment methods. In the developing world, leapfrogging could leave traditional service providers behind; in Vietnam only one in three people have access to a bank account, as many as who use the internet on smartphones.
Many new providers make use of contactless near field communication (NFC) technology, already used widely in card payments, including at 250,000 UK retail outlets. In mobile payments, MasterCard Digital Enablement Service (MDES) and others provide an added layer of security above standard two-factor authentication (2FA).
Apple is integrating its hardware and software business lines with Apple Pay. iPad and iPhone 6 owners can use the service to pay within apps. Apple Watch and iPhone 6s use MDS and are compatible with NFC in-store purchases using AmEx, MasterCard, and Visa. Within weeks of launching, Apple Pay had a 2% share of US digital payments. Over one billion iOS devices have been sold globally, giving Apple a unique advantage in market share.
Google is integrating Android Pay with its existing Google Wallet, released in 2011 in the US. Both use NFC. Android Pay works on Android 4.4 and over, and supports AmEx, Discover, MasterCard and Visa, and allows in-app purchases. Fingerprint verification is optional. Google Wallet uses coupons, credit and debit cards. It focuses on peer-peer transactions, including via Gmail.
Samsung provides a unique offering through its 2015 acquisition of LoopPay. Compatible phones will first try paying with NFC. If that fails, devices emulate a magnetic strip to mimic traditional cards. Like Apple Pay, Samsung has integrated with MDES. It works in the US with AmEx, MasterCard and Visa. Samsung Pay is currently available in South Korea and the US.
Free friend-friend Facebook Payments are supported for US debits cards in Facebook Chat. Facebook is rolling out in-site buy buttons and shops, and event page ticket purchases. CEO Mark Zuckerberg is open to partnering with other payment services, including Apple Pay. While not intending to become a payment business, it aims to keep users on-site to increase ad revenue.
Overcome payment challenges to amplify social network presence
Regulatory regimes are an obstacle. Alibaba and Tencent’s attempts to provide digital credit cards to shoppers were blocked by the Chinese authorities. Globally, differing regimes alter incentives. Due to interchange fee caps in the European Economic Area, Apple reportedly receives a significantly lower cut of Apple Pay payments in the UK than its 0.15% US cut.
Providers also need to adjust for lag in adoption. Although the UK raised the contactless transaction limit from £20 to £30, payment devices rolled out earlier have not all been adjusted.
Related: Tax Incentives in High-Tech Vietnam
Of the four companies, Apple most promotes its various security measures, claiming that it doesn’t track payments between banks, customers and vendors. Other measures currently include 2FA, fingerprint scanning, and not storing card numbers on devices using the technology. As Facebook currently offers only pin or password protection for its peer-peer transactions, the company should promote the use of mobile devices’ fingerprint scanners to take the place of traditional passwords.
Further leveraging social networks should be the target of service providers. Apps including Venmo already allow users to share financial transactions on social media, granting retailers and payment providers additional exposure. As mobile devices bridge the gap between in-store purchases and online presences, it is clear to see why we should keenly follow integration of payment services with Facebook’s network of over 1.5 billion reported users, who generate over a billion Facebook Page views a month.
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