Mobile Payments: What You Need to Know

Mobile Payments: What You Need to Know

Mobile payments have revolutionized the way we pay. It replaces cash and traditional credit cards with smartphone payment apps, wearables, and contactless cash cards. In this article, we will describe the process of mobile payments and their benefits and challenges.

Beijing residents can go through the day without cash if they want, but there are few without a smartphone. Whether in supermarkets or restaurants, you can pay through the app. Also, pay for electricity, phone or gas. And they can call a taxi through Alipay and use the software to pay when they arrive at their destination.

The smartphone app can also be used for online shopping. Alipay, which has 900 million users, and WeChat, which has 600 million users, respectively occupy half of the comprehensive payment field. In 2016, the financial transaction volume of the two mobile apps has reached about 3 trillion US dollars (data sourced from United Nations research), which is close to Germany’s GDP in the same year (IMF research shows).

What is mobile payment?

Mobile payments are usually made through a smartphone or mobile devices such as tablets for cashless payments, but sometimes also via fitness trackers, smartwatches, or smart rings. Combined with the mobile internet, these devices create a new payment method that is both convenient and time-saving. As a result, mobile payments are also attracting a large number of financial service providers, retailers, and consumers.

Mobile payments are used for all kinds of goods and services—whether at brick-and-mortar points of sale or on the Internet. (Source: PwC)

Mobile payments are a global trend. China is one of the countries driving the rapid development of this field, where people make mobile payments through smartphones every day, and it is fully integrated into daily life. The “2017 China Mobile Payments Report” shows that the transaction rate has increased by 381% during the year.

Germany has fallen far behind other countries in the field of mobile payments. The main reason for this is that German consumers are still skeptical, they are concerned about being hacked or private data may be leaked. According to a study conducted by GfK for the German Banking Association, 47% of people still prefer to pay in cash, while 25% prefer to pay with debit and credit cards.

What is the process of mobile payment?

There are two types of mobile payments: if someone is shopping online from their smartphone, they are using remote online payments. This requires a credit card or a PayPal account, etc. PayPal is a service for sending money to others virtually. The account needs to be topped up in advance or debited from the user’s bank account. Depending on the method used, users enter their credit card details into the smartphone app or log in to their PayPal account with their email and password.

Also, if a user is at a ticket vending machine or a store checkout, they can use the “contactless payment” method, which is mainly implemented through Near Field Communication (NFC) technology, but will also be implemented through QR codes and Bluetooth in the future. According to the requirements of different service providers and countries, when the preset amount limit is exceeded, the user may also need to enter a PIN or a signature to pay. Thanks to methods such as CDCVM (Consumer Device Cardholder Verification Method), payment can also be replaced by authentication by fingerprint, face recognition, or mobile terminal PIN code General card PIN or signature.

NFC payment systems: how the technology works

How do I pay with a smartphone, wearable device, or smart card?

To realize contactless payment, on the one hand, the store needs to be equipped with appropriate card terminals to provide services, and a unified icon with four white arcs is used as a logo for easy identification.

On the other hand, buyers or customers need an NFC device. Such devices can be credit cards or smart cards with wireless communication chips, as well as smartphones and devices like fitness trackers or such wearable devices. Smartphones and similar products also need to have an appropriate payment app installed, such as Vodafone customers using the service provider’s “wallet” app. Other related services also exist (see sidebar). To complete the purchase, the user has to open the payment app and hold the mobile device or card within 4 cm of the terminal. According to the requirements of different service providers and countries, the user may also need to enter the PIN code or signature of the card on the terminal device for authentication. After a beep sound, the word “OK” is displayed on the device screen, and the payment is successful.

Almost half of the users expect additional services from mobile payment providers. (Source: PwC)

In countries such as the US, China, Japan, and the UK, smartphone users can pay using the payment systems of their phone manufacturers. These payment services are tied to a credit card and can be used almost anywhere contactless payments are supported. Germany is also Gradually advancing the payment process: in June 2018, Google first launched the payment service Google Pay in Germany. At the end of 2018, after entering the US market for about four years, Apple Pay also officially announced its entry into the German market.

Mobile payments with prepaid apps and bitcoin

In addition to this, there are also ways to enable mobile payments, and they don’t even require an NFC-enabled smartphone or payment card. For example, the customer app offered by the Aiwei and Idea supermarket chains allow customers to pay by scanning a QR code. Vendor Cashcloud offers an NFC chip that can be attached to a user’s phone via a sticker. With Cringle and PayPal, users can send money to companies or other users via email or text message.

Boon and Pey are two providers with slightly different payment systems. Boon is a prepaid service for Android devices. Users must top up their Boon account via bank transfer or credit card before making a purchase.

In addition to euros, users can also pay with the pure digital currency bitcoin—at least in regions that support the service. Startup Pey has developed an e-wallet app that lets you shop directly in stores, but it’s currently only available in the city of Hanover. However, many online stores support paying with Bitcoin. The decentralized and anonymous payment system does not require a bank connection and is considered very secure due to its application of blockchain technology. The blockchain is a digital cash ledger jointly managed by Bitcoin users.

Mobile payment system at a glance

Safety and Challenge

How secure is mobile payment? What challenges does it face?

For German customers, security always plays an important role, and mobile payments are no exception. According to a survey conducted by PwC Consulting, 79% of users want to activate mobile payments quickly. But where are the risks?

Consumers are concerned that their data will be intercepted and misused before, after, or during payment transactions. Also, some data is linked: for example, shopping and payment data is linked to location data, making it easy for a data thief to know a user’s personal information.

However, tech companies are developing increasingly secure and innovative NFC Chips, they can store sensitive payment data in a secure environment.

Users know very well what they need and want from mobile payment providers. (Source: PwC)

NFC technology is secure for two main reasons: the signal range is limited to a few centimeters, and the data is transmitted securely. For example, users who want an extra measure of protection against hackers can buy a smartphone-specific case. However, by NFCTo stealing money is a rather shaky idea, since most transactions are done by registering scanning devices, so this process is traceable.

But what happens if a user’s smartphone, wearable device, or payment card is lost or stolen? Of course, if you encounter a loss, you should call the police as soon as possible, but the loss may not be large. Because criminals want to steal large amounts of money, they need to be authenticated via a mobile terminal or by entering a card’s PIN.

In the event of a lost payment card, there is another valid option: the customer receives an email or a text message after each transaction, which means the fraud is exposed as quickly as possible, and the provider can stop it in time.

Global Safety Standards

Development and future

How we will pay

Experts firmly believe that mobile payments will become the dominant payment method in the future as more and more solutions applying various models are established globally. For example, instead of paying with money, Swedes use “Swish”. The operator of the software said that in 2016, 43% of Swedish citizens were using the Swish app for transactions. In South Africa, customers use their fingerprints to shop in supermarkets with a biometric MasterCard, while China will immediately use facial recognition. In Kenya, a Vodafone subsidiary introduced the simple M -Pesa mobile payment service back in 2007. Today, more than 30 million people make micropayments with credit stored on their SIM cards.

According to a PwC study, most Germans are also open to mobile payments. They want payment apps that are both secure and functional. This requires uniform standards and requires users to be able to pay anywhere with one system.

By aamritri

Leave a Reply

Your email address will not be published.

Related Posts