Posted on 04/05/2012 at 15:15

E-Commerce Magazin, issue 02/12

Trend topic mobile payment – taking stock
Mobile telephones are increasingly becoming a “smart” multi-functional tool. Always with and always on, they offer users a wide range of possibilities that make every-day life – such as shopping – easier.

In a recent survey KPMG confirmed that almost half of all of those questioned use their mobile phone to look for a specific store close by. One in three participants has already submitted coupons using their smartphone. And one in five has used a barcode in the store to find out additional information on individual products on the Internet. Worldwide, 25 percent of those questioned stated that they use their mobile phone to make payments at least once a quarter.

What influence do these developments have on retailers who want to offer their customers “mobile payments”? How can shop operators make their business mobile? What methods will prove to be winners?

Payments using mobile phones
If payments are made using a mobile phone (payment on mobile), the customer either pays directly from a mobile application (in-app payment) or using the smartphone’s mobile browser.

As a rule, we can distinguish between three different methods:

1.    Payments using the mobile phone account
2.    Traditional payment methods
3.    Consumer’s customer account

1.    Tried-and-trusted: Payments using the mobile phone account
If the consumer makes payment using their mobile phone account, the settlement is either made using the mobile phone bill or, in the case of prepaid contracts, using the existing credit balance. The success of this method goes back to downloading ringtones, where the aim is to process a large number of low-volume transactions. This method is still exclusively used for payments for digital products with a very low amount in the cent region.

In practice, this direct carrier billing is tried and trusted, as both parties benefit equally: Retailers have guaranteed payments and thus cut their risk of payment defaults. Mobile phone customers benefit from the fast, simple use: They can use this method immediately without having to register in advance. After inputting their mobile phone number (MSISDN) and an mTAN (one-off password), their mobile phone account is charged. Global availability makes payments using a mobile phone account particularly attractive.

Direct carrier billing has its limits in this regard, with specific countries imposing certain bans, for example for adult entertainment. The payment guarantee has its price for retailers: The fees are very high compared to traditional or alternative methods at 10 to 50 percent of sales. In addition, shop operators sometimes have to wait up to three months to receive payment.

Aggregators are used for payment processing. They take care of

  • integrating the mobile phone providers’ IT systems
  • settlements with these companies and
  • the subsequent payment, including currency management to the retailer.

In addition, individual service providers offer additional offers, such as a type of pre-financing, for which revenues are paid to traders even before these have been credited to the aggregator by the mobile phone provider.

As prices, country coverage and content-based restrictions vary greatly, shop operators are well advised to check exactly which provider provides the best fit with their business model. In any event, the issue of whether the necessary support for mobile browsers is offered should be clarified, and also if any software development kit (SDK) that may be required can be provided in order to include this model directly in a planned mobile application.  

2.    Well known: Traditional payment methods
If a mobile version of the online shop’s payment page is available, consumers can also pay with their smartphones using a credit card or direct debit.  

The payment page is loaded from the payment service provider’s server, and combines all of the payment methods that a trader wants to offer its customers. The entire payment process, including interaction with the end customer, inputting payment data, return reports or error rectification is taken over by the payment service provider. New payment methods can be activated and deactivated at any time and without the need for extensive programming. But no matter how comfortable outsourcing the entire process is: It is linked with lower control of the payment process and also the look and feel of the respective payment application or the Web shop, even if technical possibilities are very advanced. In so doing, attention must be paid to the advantages and disadvantages that come with using an adjusted Web site based on HTML (mobile Web browser) instead of programming in a native mobile application. For example, mobile Web apps can be called up by the browsers on all standard mobile devices, however native apps are tailored to specific devices or software.

As an alternative to this Web-based solution, traders can thus also integrate back-end interfaces. In this case, the shop receives the payment data using its mobile Web site or directly in the application, and transfers this to the payment service provider (PSP) via the interface. Prior to deciding whether to use direct integration, all aspects such as user friendliness and security must be weighed up. For example, in this alternative, the trader itself must ensure PCI-DSS certification, which is required for credit card payments. In addition, in agreement with the payment service provider, a check must be performed as to which alternative payment methods, such as immediate bank transfers, Giropay, PayPal or ClickandBuy should be included, and if a mobile version is available for these. The standard version provided by all of the providers for desktop browsers is not suitable for the comparatively small displays on mobile phones.

Ideally, the PSP and the operator of an alternative payment method will automatically switch to a mobile version of their solution if the system recognizes that the customer is accessing the solution from a smartphone. The end customer automatically receives the mobile version for payment processing, which is easier to use and navigate, even if they come from the trader’s traditional (non-mobile) online shop. The shop provider must check to see if the payment service provider offers this kind of mobile version for their payment page.

3.    Much-loved: Consumer’s customer account
According to a current study by Fittkau & Maaß, only one in 13 smartphone users intended to purchase Christmas presents using their smartphone last holiday season. At the same time, PayPal recorded a year-on-year increase in the global volume of mobile payments by 511 percent over Thanksgiving.

These contradictory results clearly show that inputting the invoice and delivery address, payment data and additional information prevent end customers from using their mobile phones for mobile commerce more often. Companies such as eBay or Amazon are, as things currently stand, almost the only companies to benefit from mobile commerce. They allow highly comfortable payments for their consumers - payments are processed using data already stored. As a result, smaller and medium-sized shop operators should consider using PayPal and or Amazon Payment as payment options, in particular to acquire new customers.

The number of purchases which are not completed can be reduced, for existing customers in particular, if this payment data required does not have to be re-input, but if payments are authorized by the existing end customer account when they log in to the trader.

Special companies such as Shopgate offer an alternative for shop operators who do not want to use PayPal or Amazon Payments: These companies consolidate the integrated traders - all registered end customers thus have the opportunity of shopping and making payment quickly and easily in all of these shops.

Smartphones have been around for five years. That means that mobile commerce and payment are still “young” - for both the industry and consumers alike.

Mobile commerce and payment will (have to) grow even further in the direction of end customers with regard to user-friendliness and service. Transitioning eCommerce and its processes to mobile phones 1:1 ignores the challenges and also the opportunities offered by mobile commerce and payment. Still more concept-driven and creative work is required in this regard, in line with “mobile first”. At the same time, it is up to end customers to discover the new opportunities offered by mobile commerce and payment.

Christian von Hammel-Bonten; EVP Telecommunications Wirecard AG

Original German news article:
Medienbericht E-Commerce Magazin 02/12