Dr. Jan Deepen, co-founder of mobile payments company SumUp, explains why in the next twelve months we will see mobile payments enter our everyday lives.
In terms of widespread implementation, mobile payment technology has been gathering momentum for a number of years, but has remained somewhat under the radar. However, this is going to change in the upcoming months. In my opinion, we are very close to the tipping point. As various factors ranging from technological developments to changes in attitude coalesce, mobile payments technology, in the next twelve months will transform the way we all pay for things.
The term mobile payments can refer to a whole range of methods in which smartphones and tablets devices are used to process financial transactions. This includes concepts such as mobile point-of-sale (mPOS), the mobile wallet which allows paying for goods directly with a phone and mobile money transfers.
mPOS allows business owners to process transactions without the need for a traditional card reader or till system. It is the growing use of mPOS technology by merchants which could provide the catalyst for the adoption of wider mobile payments technology. The reason for this is two-fold:
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First, with more businesses using mobile phone technology to let consumers pay for goods, the perception of the technology is manifestly changing – put simply, people are getting more comfortable with seeing mobile phones used for financial transaction in their everyday lives.
Second, the availability of high speed internet connections and the development of mPOS technology have allowed the creation of a new wave of innovative companies which are compliant with rigorous financial regulations and familiar with creating complex payments products. There is a groundswell of industry experience in the mPOS sector that will permeate into the wider payments sector and will help consumer-friendly, financially compliant products to develop faster.
The vast majority of us are spending increasing amounts of time on our mobile devices, using them for a whole range of things including shopping, booking holidays and checking bank balances. It is a natural process that these devices will form the backbone of our financial transactions. The ubiquity of mobile and smart devices combined with the ease and relative affordability of mobile payments technology is a key driver of growth. According to Gartner, the value of global mobile payment transactions reached $235.4 billion in 2013.
mPOS technology is becoming particularly popular for a range of reasons. For merchants and businesses, mPOS systems are an attractive option because they offer a flexible and thoroughly affordable means to accept and process card transactions, while still presenting users with a recognisable interface. Unlike traditional card payment companies, which use bulky and static card terminals, mPOS harness the technology which already exists in users’ phones and tablets.
Crucially for small businesses, mobile payments companies such as SumUp require no rigid contracts and there are no expensive set up costs. It is the cost of renting and installing traditional card acceptance units which deters many smaller businesses and traders from accepting card payments. This can often result in ‘cash only’ – much to the ire of casual shoppers and to the detriment of those companies’ bottom lines. Over 120 million transactions are lost in the UK every year due to businesses not having the facility to accept card payments, according to research from Judo.
For many, the final part of the puzzle required to ensure that mobile payments are fully accepted is linked to assuaging security concerns. This is simply about educating people and normalising the idea that mobiles can be used to pay for goods. The established mPOS companies are working closely with financial organisations such as MasterCard and Visa and as a result, are fully certified by major credit and debit card players. Some companies, including SumUp, are also licensed by the FCA. The combination of these measures ensures that payments are processed with the highest security standards for card payments.
Everything is in place for mobile payments to become the dominant way in which we pay for things. mPOS is the most straightforward form of mobile payments as both merchants and consumers are presented with recognisable and easy to use interfaces and card readers. This year will see the mPOS sector grow rapidly, which in turn is likely to spark a wider adoption of mobile payments technology. As we all start to get comfortable with the concept of using smartphones in financial transactions and as the technology becomes more developed, the move towards seeing a phone as a wallet becomes inevitable.