What drives people to use their phone to make a mobile payment? It all depends on the alternatives available to them. In Australia, where I am writing this post from, we tend to be early adopters of technology and are very fortunate in that we have a number of payment methods available to us – credit/debit cards, cash, cheque, online payments, bank transfers, etc. Although the national payments network is showing its age (no Real-Time Gross Settlement yet), we have embraced a wide range of payment methods for retail and B2B transactions. In the last couple of years, both Visa and Master Card have introduced contactless payments that are now accepted by the majority of retailers. More recently, signatures have been phased out in favour of PINs for purchases using cards from the main scheme operators. For ease of use, nothing beats simply taking a card from your wallet and waving it in front of a machine – no cash to worry about, no change to count, no PINs to enter (for amounts below a threshold), and nothing to sign. Contrast that with making a mobile payment – unlocking the phone, starting the payment app, authenticating yourself, entering the recipient details (manually, or by scanning a barcode or QR code), entering the amount, sending the payment to be processed, and finally receiving the payment receipt (or rejection). Then think about the additional time taken at the checkout – for many retailers, this translates directly into lost revenue. It’s no wonder that mobile payments have not taken off in Australia and markets with similarly advanced payment options and highly banked populations.
So what would it take to make mobile payments successful in these markets? Essentially, there has to be something in it for the user – something to make it worth their while to forego the ease of use of a card, compared to using their mobile phone. The benefit to the user could take the form of additional transaction security (e.g. biometric authentication) or a bonus in the form of “loyalty” points or a similar incentive. Most promoters of mobile payments have taken the loyalty route, as enhanced security measures often involve additional complexity in the transaction flow (e.g., two-factor authentication) or accessories for the mobile phone. The one exception to this is the new Apple Pay service which introduces biometric authentication by using the iPhone’s inbuilt fingerprint scanner, as well as tokenisation – both important measures to protect the customer’s payment information. In general terms, the easier it is to perform the mobile payment, the less incentive has to be provided to make that the preferred payment method.
Contrast this with developing markets where a large percentage of the population is unbanked; users have only two options available to them – cash, or mobile money. There are well-known security issues associated with cash that mobile money circumvents. The additional security and financial manageability provided by mobile money provide the incentive for users to use it over cash – it’s not about ease of use, it’s all about security and managing personal finances.