Take a virtual glance across the pond, and you’ll notice that the way people barter is changing. The use of paper and coin is becoming increasingly obsolete. However, ignoring traditional ecommerce solutions for the moment, mobile payments have yet to go mainstream here in South Africa.
Consumers in parts of Europe and Asia have been making purchases using their cell phones for the better part of a decade now. And indeed, Africans aren’t strangers to the concept of mobile commerce either. But where we’ve still yet to make a connection is with that of mobile payment systems.
What is a Mobile Payment System?
The phrase ‘mobile payment system’ can apply to a number of different technologies and executions for initiating and accepting transactions via a mobile device.
Forrester Research explains mobile payment systems as two separates categories:
- Payment systems that utilise a mobile network to initiate or authorise a transaction.
- Contact less systems that use a mobile phone in lieu of a traditional credit card.
In layman’s terms, mobile payment systems apply to both how consumers pay for goods, as well as how merchants can process transactions.
Systems that Process Payments
Start-ups like Square (and there are a few out there) aim to cut down the barriers associated with accepting credit card payments, while only asking 2,75% of the transaction fee with no other associated costs.
Square works by combining a small, square-shaped card reader with a free smartphone application. By simply plugging the reader into the microphone jack and opening the app, transactions can be processed either by swiping the card or hand-keying the digits. This makes it easy to use, and portable.
Where a solution like Square becomes relevant is in a Flea market-type scenario. It eliminates the need for vendors and small businesses to set up expensive point-of-sale systems, but also doesn’t restrict card-only customers from making a purchase. It supports commerce, as opposed to needlessly kerbing it.
Systems that Let Consumers Pay by Mobile Phone
Imagine using your mobile phone the same way you’d used your credit card. It makes sense. After all, the one item you have on your person at all times, other than your wallet, is your mobile. It can do everything else, from email to twitter. So why not act as a money bank too?
When it comes to actually paying for items using your phone, the future is all about NFC or Near Field Communication.
How does it work? Well, NFC is similar to Bluetooth, but has a much faster means of communication. NFC enabled devices are able to instantly recognise each other, transferring data, like banking details, almost instantly.
NFC has been in the works for nearly a decade now in the States and Europe, but has only very recently taken traction here in South Africa.
ABSA has launched pilot NFC initiations, which will see five hundred bank staff using NFC enabled Blackberry smartphones to make MasterCard PayPass payments. The hope is to pioneer a the system in South Africa which will lend itself to assisting in transport ticket purchase, faster queuing times, and less need for paper tickets or receipts to be printed. The uses of NFC are clearly evident, and will continue to progress with awareness.
Understandably, one of the primary concerns with mobile payments is security. When it comes to payment processing systems and point of sale systems, data encryption is of utmost importance. However, NFC has a much shorter range, making it more secure.
However, current credit card Point of Sale terminals and systems are often insecure, yet millions of consumers use them every day. And at this stage of R&D, nothing indicates that there is anything about mobile payments that is fundamentally more insecure than any other system.
Where Do Entrepreneurs Come in?
Forrester Research reckons the London 2012 Olympics will be the first major event where mobile payment systems using NFC will be on display in a big way. But It could be years until more businesses and venues start to adopt mobile payment systems.
In the meantime, Entrepreneurial and openly experimental companies like Starbucks have started accepting mobile payments at stores nationwide. Last month, the company announced that over 3 million people had chosen to pay for their coffee using the company’s app. Even large-scale traditional financial services companies, like American Express, are betting on mobile payments to be a big part of the future.
What we need to remember is this- South Africans are poised and ready to make use of a system like this. We skipped the PC internet era, and jumped straight to Smartphone internet. We know how to use our devises. And we adapt quicker than most countries to using new technologies.
Even with the unfounded security concerns, mobile payment systems are still poised to help redefine the way the world does business.
But they could drastically shift the way South Africans Live.