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Summary:

Some of the groundwork is finally being laid for mobile payments, but the industry still has to find ways to convince users to pay for stuff with their phones. For the mobile wallet to catch on, apps will have to do much more than execute transactions.

mobile payments

While I remain skeptical that mobile payments will enjoy the kind of skyrocketing usage some analysts have predicted, some key pieces are undeniably beginning to fall into place to pave the way for growth in the area. Verifone’s vow to include NFC in all its point-of-sale terminals will go a long way toward spurring retailer adoption (which so far has been nearly nonexistent), and handset manufacturers are finally buying in and beginning to package NFC in their smartphones.

But simply providing the technology for mobile payments isn’t enough — the industry still needs to offer truly compelling reasons for consumers to reach for their phones rather than their (real) wallets. The key to that will likely be in developing mobile applications that consumers actually want to use as they shop and conduct transactions.

But how do they do that? In my weekly update at GigaOM Pro, I examine several features that could entice users to make a mobile payment rather than a traditional one. Here are a few:

  1. Integrated money management: A good mobile wallet app should enable users to track any account tied to the app, including checking and credit card accounts. This could even help users manage their finances by tracking their spending and alerting them when their bank accounts are low — or credit card balances high. That kind of functionality will force developers to work closely with financial institutions to create ultra-secure apps, but those kinds of measures are already becoming commonplace in this era of mobile banking with Mint and bank-specific apps.
  2. Product and price information: Like ShopSavvy and other offerings, a payment app should help users find more information about a product by scanning the barcode (or by tapping a phone on an NFC chip embedded in the packaging). And it should sense location via GPS (if a user chooses to allow it) that tells users if another store nearby is selling the same item for a lower price.
  3. Airtight security: Any new payment technology is sure to be greeted with skepticism by some consumers, so the mobile wallet must be even more secure than credit cards. Not only must financial information be ironclad, the app should be able to track purchases against the location to ensure that users are actually where purchases are being made.

For more thoughts on how to get consumers to reach for their phones at the retail counter, read the full post (subscription required).

Image courtesy of: flickr user whiteafrican.

  1. Some ideas tossed off the top of my head:

    1. automatic (perhaps even crowd-sourced) categorization of purchases for personal financial management. equivalent of in-app purchases of physical goods, for example, how about a collectible card game that can be played in person or online. automated databases for your collections.

    3. beating the security of a credit card is a pretty low bar. several protocols already exist and have even been fielded, extending to a mobile phone shouldn’t be hard… hopefully no-one will try to reinvent the wheel, but realistically speaking several will (and almost certainly create broken protocols)

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  2. I wonder actually if some pressure won’t come in the form of negative developments for other payment methods. Specifically, if the new debit card fee regulations go through, I’ve heard grumbling about banks setting transaction caps (as low as $50 or $100) for debit card users. If mobile payment can tap into checking accounts w/o being roped into those kinds of limits, it might be an attractive alternative.

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  3. Like the idea in theory as it makes carrying around money or loose change non-existent. Will help people from getting assaulted on the streets for change? Sadly that’s the first thing that popped into my head.

    The bump in the road is, obviously, the security measures that need to be implemented and the cost it would take to incorporate NFC into everything. Restaurant chains, ballparks – that’s easy. How about vending machines and smaller mom and pop shops that can’t afford NFC?

    http://www.techviva.com

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  4. I think the biggest thing mobile wallet apps need to do is offer concrete value to consumers, and the best ways that comes to mind to meet that end is to make it as easy as possible and as rewarding as possible (coupled with what you’ve outlined above). Whether this is through personalized coupons and offers based on shopping history or incentives for using mobile apps, I think we’ll see continued adoption as all involved parties figure this whole mobile wallet thing out!

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  5. There’s no debate that NFC has the potential to make the mobile wallet a reality, but as you mention, widespread consumer adoption is vital for this technology to meet its potential. Fortunately for NFC advocates, there are tangible advantages that NFC offers over traditional credit cards – most important, perhaps, are the increased security features. I work for Kony, and NFC technology offers the closest thing to “airtight security” that we have seen so far due to its use of encryption. Along with this, many NFC systems are using time-based tokens for security, meaning the credit card number changes every few seconds. Once more retailers adopt this technology, and consumers are made aware of the security enhancements NFC offers, it will likely only be a matter of time before it begins to fulfill its potential and make the mobile wallet a reality.

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