The Mobile Payment Evolution
The Mobile Payment Evolution

It is expected that by the end of 2016, at least 4.8 billion people would be using mobile phones.  A recent report revealed that in 2015, 39% of U.S. mobile users made at least one mobile payment transaction.  This figure is up by 25% from 2014’s 14% mobile payments.  At the rate things are going, it is estimated that by 2017 it could go near the 70% range.

Due to the unprecedented growth of mobile payments and to meet the growing demands of users, you can expect the mobile payments industry to evolve until it has reached its ultimate form.  It is best to learn the history and progression of mobile payments to understand how big it’s going to be.

A Look into the Mobile Payments’ Past

In the past and at present, people have been using a sort of payment system to purchase the needed goods or services from merchants.  We used the bartering system, where commodities (such as shells, grain, and livestock) were exchanged for other commodities, to purchase the things that we need.  We also used gold, silver, gems, and other valuable stones or metals in exchange for the needed goods.  Metal coins and bills were later introduced to create ease of transaction.  The introduction of charge cards and credit cards allowed us to pay for the things we purchased even if we don’t carry any cash (provided that the card is good).  Not too long ago, electronic payments were introduced.

People prefer easy transactions and the convenient way to make payments.  The introduction of charge card in the 20th century gave way to such preferences.  Charge card was first mentioned in the 1887 book “Looking Back” by Edward Bellamy.  However, the first charge card appeared in 1921 when Western Union issued charge cards to their customers.  It did not take long for hotels, service stations, and department stores to follow Western Union.  They too started offering charge cards to their clients.

The Diner’s Club card was introduced in 1950.  After that, the credit card industry began to take shape into something that people of today can recognize.  The first modern-day credit card was introduced in 1958, the BankAmericard.  In 1977, it became Visa.  From that time, technology has provided modern society the videotex systems (late 1970s to mid 1980s), online banking and bills payment (1994), WAP or mobile web payment (1997), and the mobile payment apps in the current time.

Here is a timeline of the electronic payment advancements in the 21st century:

  • In 1983, an American cryptographer named David Chaum paved the way to the beginning of cryptocurrencies. He started creating digital cash through his blinding formula, which is RSA algorithm extension.
  • Some people believe that the first online purchase happened in 1994 – for a Pizza Hut pepperoni and mushroom pizza. However, this piece of information still needs further verification.
  • In 1998, PayPal was established.
  • In 1999, Telnor Mobil and Ericsson made it possible to purchase movie tickets through mobile phones.
  • In 2003, there were 95 million mobile phone users around the world who used their mobile devices to purchase something.
  • The Droid and iPhone operating systems were first released in 2007.
  • Bitcoin first circulated in 2008.
  • In 2011, Google wallet was introduced.
  • Apple Pay was launched in 2014, and Samsung and Android Pay followed a year later.
  • It is projected that mobile payment sales will generate $60 billion by 2017, and by 2020, it is expected that 90% of users of smartphones have made a mobile payment.

Different Mobile Payments

The different mobile payment modes are: commerce, payments, and mobile wallets.

When using the mobile payment type known as commerce, customers must open a browser first to access the shop where they need to make their purchase.  They need to add the things they will purchase to the cart, place their order, receive the items they purchased, and get a receipt.

When using the mobile payment type known as payments, the customer’s payment information is stored in his or her device, and to complete the transaction the customer has to enter a PIN.  It uses a contactless/mobile app technology.

When using the mobile payment type known as mobile wallets, customers aim to replace their current wallet by keeping their payment information in their mobile phone.  If you want to keep a mobile wallet:

  • You need to add funds to your phone.
  • The bar code of the item that you wish to purchase will be scanned and the amount of the item will be deducted from the funds in your phone.
  • You will see the new balance on your phone.

There are still other options within the said types of mobile payments.  Customers typically need to download an app (usually offered by the merchant) to access the other available mobile payment options.

The Shifting Mobile Payments Setting  

There’s no stopping the mobile payments evolution, and it is evolving swiftly as more familiar brands are joining the industry.  These brands want to offer the things that consumers and businesses are looking for when it comes to apps and services that let them purchase using their phone.

For instance, Google recently introduced Hands Free.  Like most other payment apps, it also uses Wi-Fi or Bluetooth and the only exception is that Hands Free allows you to pay without taking out your mobile device.  Google is also considering using facial recognition in confirming a person’s identity.

Major banking institutions, such as Bank of America Corp. and JPMorgan Chase & Company, engaged in a joint venture called clearXchange, which gives the customers a convenient way to transfer funds to their other bank account using their mobile phones.  More of the latest trends and experiments in mobile payment industry intend to offer greater ease and security.

Expect wearable tech to offer mobile payments next.  Soon, you will be able to make purchases using bPay band, the Lyle & Scott bPay jacket, Jawbone UP4, and other wearables.

Retailers like Wal-Mart make use of geolocation technology to provide shoppers with deals and localized coupons delivered to their phones while shopping.  Bloomberg technology remarked that by 2019, eMarketer assessed that the overall amount of transactions made on in-store terminal via phone will reach $210 billion.  In 2015, the total amount reached $8.7 billion.  This only indicates that retailers will give Google’s Android Pay and Apple Pay a tough battle, give more options to use mobile payment, and more savings on transactions.

There are also indications of growing use of cryptocurrency and blockchain in mobile payments.  Recently, the technology behind bitcoin has been the talk of the town.  Companies like Movile are recognizing the probability of using bitcoins for in-game micro payments as well as substitute currency to use for mobile payments.  Messaging apps and social media also joined the mobile payments industry.  Beacons and sensors as well as big data provide great help to merchants.  Retailers and merchants can send targeted coupons, flash sales, promotions, and others to their customers with the help of big data.

At present, there is no global payments standard in existence, but there is a drive to create one standard for the countries all over the world to follow.  It could become a real game-changer when that happens.  The mobile payments industry is fast becoming one of the most in demand sectors in tech with companies, like Venmo, that are processing mobile payments of more than $1 billion each month.

The mobile payments industry can bring a lot of good things, but there are issues that must be cleared or addressed first, such as questions about security.  The evolution of mobile payments is unstoppable and everyone can expect that the things being anticipated, as stated in the beginning, will come true.