The broken world of mobile payments and how to fix it

By John Rampton for

It’s being predicted that by the end of this year, mobile payment transactions in the U.S. will grow 210 percent. Despite this impressive gain, it turns out that not everyone is taking advantage of mobile payments.

In fact, in a recent study on eCash wefound “Only about 1 in 5 people (20.7%) in the U.S. that have an iPhone that works with Apple Pay, (this would be the iPhone 6 and newer versions), have even tried Apple Pay.”

To add salt to the wound, Tech Insider also discovered that 56 percent of users “have only used Apple Pay once during a typical week, and 15.3 percent say they have ‘never’ used it during the week.”

Why aren’t more people enjoying the convenience and ease of mobile payments? There are always numerous reasons for the variance in behaviors in the world of tech. In the world of mobile tech — where a monetary system is being set up and becoming an accepted avenue for the exchange of money and payments — there seems to be some concern.

Some have said that the system for money exchange in the mobile world was brokenbefore it began. But is this statement true? Let’s address some of the concerns about the world of mobile payments.

Security, security, security

Arguably the biggest concern regarding mobile payments is the fact that people are worried about security. In fact, during the Money 20/20 2015 Conference, Bryan Yeager, an analyst at eMarketer Inc., claimed that “mobile payment user growth is projected to grow to 37.5 million users in 2016, up 62%.”

However, it seems security is still prohibiting some of the mobile payments. Yeager informed the audience that:

“57% of US internet users cited security concerns the main reason they were hesitant to use mobile payment services.” He also stated that “62% of US smartphone owners that don’t use or plan to use a mobile wallet cited worries about security as the reason.”


No global standard

International compatibility is another concern when using mobile payments. As Raomal Perera, CEO of Valsita, says, “The reality is that until common interfaces are defined, based on current standards users will not properly engage in m-commerce. Only then will consumers see the benefits of using their mobile phone as an ‘electronic wallet’ that allows them to conduct transactions more conveniently than more traditional channels.”

Once a global standard is adopted, consumers will be able to “use any application without having to install new software each time they make a purchase,” Perera adds. This will simplify the purchasing process and spark innovation.

Not yet obtaining a global standard also makes using mobile payment systems a hassle when traveling abroad. For example, Vodafone’s M-Pesa may work perfectly in parts of Africa, but users would have trouble using the same system if they are traveling through Europe.

[su_pullquote align=”right”]We may come to a point when cards and mobile wallets stored on our smartphones will come to an end completely. [/su_pullquote] Visa is attempting to change the money problems inherent when traveling to other countries with its Digital Enablement Program (VDEP). The U.S. is now accepting EMV (Europay, MasterCard and Visa), which will in turn put this concern to rest. The future of mobile payments is getting brighter as companies like Visa, MasterCard and AMEX are coming together, but, currently, no standard is in the works.

Difficult to uninstall mobile wallet apps

What happens when a mobile app shuts down or you’re not satisfied with the service? You would think that you could easily uninstall the app. This may not always be the case. Early adopters to the mobile wallet apps used apps such as Softcard, which later closed their business and users couldn’t uninstall the app.

As PaymentsSource states, “When a mobile wallet fails, it doesn’t go away. Companiescan upgrade dormant apps and remove their functionality, but the apps stay on users’ phones.” To observe this problem firsthand, merely take a look at the “Wallet” app on your iPhone. Most likely every person reading this article has the wallet app on their iPhone — and you can‘t remove it either. Why?

Mobile technology remains fragmented

If you’re a merchant toying with the idea of accepting mobile payments, you have different options: NFC, code based and cloud based. Depending on your industry and clientele, each option has its pros and cons, which can make it difficult to choose which option to use.

[su_pullquote]Mobile payments will remain a tough sell for those who are set in their ways. [/su_pullquote]For example, if you just purchased a new EMV POS system that comes equipped with an NFC reader, why would you invest in a code-based or cloud-based system? But, what if a large percentage of your customers prefer code-based or cloud-based systems? Are you willing to invest in those systems? Obviously, the answer would lie in finding the percentage of your customers who request or require a certain system in order to use your product or service.

Old habits die hard

According to studies conducted by The Pew Charitable Trusts, there remains a portion of the population who are satisfied with their current banking system because they feel it is more secure and less complicated than mobile payments. Additionally, non-users of the mobile payment system also enjoy the incentives their credit or debit cards provide.

Until more people feel the safety issues have been addressed, and they learn how to use the mobile systems with ease, mobile payments will remain a tough sell for those who are set in their ways.

The future of mobile payments

Despite the convenience and potential that mobile payments currently possess, there remains room for improvement. This is where innovation will come into the picture. According to Bijan Khosravi, founder and CEO of InBounce, this innovation will include:

Peer-to-peer paymentsThe ability to send people money directly and simply by using your mobile device is already here, thanks to apps such as VenmoDwollaDue (personal company) and even Facebook Messenger. Apple is also getting into the action. The Wall Street Journal states that Venmo is already “favored by young adults and teenagers who particularly like a feature in which theycan list their payments on a social-media feed.”

Plastic will be replaced. Instead of carrying a number of credit or debit cards, smart phones will consolidate your cards into one location. This consolidation will also be the case for gift cards. Google Wallet and Apple Pay are already using this technology, but LoopPay is another interesting option that will also store gift and loyalty cards.

Centralized awards points. To pry customers away from traditional reward systems, merchants can use a centralized network where they can accept loyalty rewards from each other. For example, you could use your airline miles from Delta for your purchase at Starbucks.

Charitable contributions will evolve. People will be able to donate to socially conscious projects like never before. HandUp, for example, is a startup that allows you to view the profile of a person in need of financial help and donate money to that specific person on the profile or SMS.

Virtual banks will replace brick-and-mortar institutions. There will be a point when we no longer have to rely on physically visiting a bank to create an account and conduct all of our banking needs. This will become important for the unbanked population who previously did not have the means or ability to physically visit a bank to open an account. This will also assist employers in paying employees who do not have a bank account; dopay is a payroll solution that accomplishes this task.

But what about the biggest concern involving mobile payments: security?

Currently, companies, such as Android, have implemented something called host card emulation (HCE). Bell ID describes HCE as “a technology that emulates a payment card on a mobile device using only software. This approach offers technical and business benefits to a wide range of mobile industry stakeholders who are active in the near field communication (NFC) payments ecosystem.”

Previously, mobile payment credentials were stored on the device inside hardware known as a secure element. Thanks to HCE, this secure element is now outside of the device. This improves security because it removes third-party involvement at a low cost.

Another company addressing the security of mobile payments is ID Global Solutions Corporation and its IDComplete. This company says they can prevent fraud because, “IDComplete utilizes a secure encrypted irreversible tokenization process with multi-factor authentication to enable secure real-time cardholder verification.”

Beyond that, technology could also lead to even more interesting developments in the paymentsindustry. One of the most widely discussed innovations in the mobile payment worldis cryptocurrency like bitcoin and the blockchain. Blockchain is estimated to be able to save global businesses up to $550 billion each year. Currently, companies like IBM, Intel, Cisco, JP Morgan, Wells Fargo and State Street have created their own global online ledger known as the Open Ledger Project. The hope is that this blockchain, along with other alterations, will “provide a more secure, more reliable, more transparent, and more automatic way of exchanging money, securities, and other assets.”

Furthermore, as mentioned in Wired, “it will also let you trade assets as easily as you trade emails today — and you can trade them without putting your trust in any one person or organization. This could eliminate many of the slower technologies and expensive middlemen that clog up today’s markets.”

Finally, we may come to a point when cards and mobile wallets stored on our smartphones will come to an end completely. There are a number of companies who are experimenting with using biometrics as a payment solution. This could include everything from fingerprints, facial recognition and heartbeats as way to verify a payment.

Whatever the hurdles that must be tackled, it seems that our mobile payment options are only going to increase. Companies and innovators are going to have to solve some of the problems and issues surrounding the mobile payment world. By addressing, answering and solving the questions that have been raised, companies will be able to quiet the hesitation of its users by providing optimal solutions for the convenience ofmobile payments.