Mobile payments in the UK
Opinion: Thurs 28th May 2009
46% of Americans are ready to shop on their mobile - how about the UK?
Brand Week reports how Americans are getting ready for mobile shopping. In a recent study by Harris Interactive, almost half of the Americans (45%) are willing to shop via their mobile phone as they consider it to be a safe option.
The younger audience is in particular acceptable to the idea on mobile shopping, with 59% of 18- to 34-year-olds considering it to be safe. There is also a slight difference in gender, as 50% of men trust mobile shopping compared to 39% of women.
The UK Experience
There is little evidence to suggest that at the moment, mobile shopping will take off in the UK. Whilst it is an obvious payment method for mobile services, such as apps, games and ringtones, the idea that mobile can provide a broader payment system for a whole range of goods or services is yet to take off.
What are the current payment options for mobiles?
Numerous studies show us that direct card payments on mobile are too complex and not usable. There are simply too many card details to enter for it to offer a functional solution. Pre-registering a card offers a more viable option as it enables users to complete the payment within a few clicks. This is the method used successfully in the Apple istore for example. However, as there is no broad or universal card registration scheme for mobile, it means that users must register for each service.
Apple's success has been that many people have previously registered with their itunes service. However, Google has had considerably less success with their Checkout service for the Android Market.
Premium rate SMS
Premium or reverse billing SMS are the primary method of mobile payment. These are enacted through shortcodes - 4, 5 or 6 digit numbers - where the user must text their request first, and in reply they will receive a billing message with a value from 25p to £5. Premium SMS is regulated by PhonePayplus, where there are controls over how it is advertised and the kinds of services that it may be used for.
Wap billing
UK network operators joined in 2006 to develop Payforit - a standardised mobile payments system. Payforit is a Wap-based system, which allow users to pick up products, pay via the mobile Internet, and be charged directly on their mobile phone. The Payforit charges are a single click, which deducts £5 or £10 from their bill.
Although it has been heavily promoted by mobile operators and Payforit service providers, the scheme has never really taken off. There appear to be a few reasons for this: mobile users need mobile internet - currently less than 30% of people have access, there is an inherent distrust of mobile payments due to a number PSMS scams and scandals, and adoption by vendors has been poor due to the low out payment rate. Whilst a credit card or even Paypal payment will cost a few percent of the transaction, the mobile operators can take over 35% of the cost of a Payforit transaction. Thus, from a £10 billing, the vendor may see only around £6.
RFID Payments
RFID payments will arrive by 2010 and we think it will be the next big thing. But how does RFID payments work and why are we so positive?
RFID is a type of Near Field Communication (NFC). It is similar to Bluetooth, but it uses the slightly different RFID technology, which has been around for year.
RFID simply enables mobile users to make a payment by swiping their phone close to a reader. Although it may not replace cash entirely, it offers a great alternative: Imagine buying a newspaper by swiping the point-of-sale terminal with your mobile.
Just like using a credit card, the paid amount will be deducted from the user's bank account at the time of transaction. The advantage is clear; it is much easier as users will no longer have to make pre-payments or top-ups before use.
Another plus is that RFID mobile payments allow the user to access several bank accounts from the mobile - much more flexibility for the end-user.
The communication system between the NFC chip and the mobile's SIM card has been standardised by the EU in October 2007 to make it thoroughly secure. The GSM Association's have taken initiative to work together with mobile operators and develop a global RFID system called Pay-Buy-Mobile.
So what will mobile payments be like in the future?
There's no doubt that we will soon be using our 'mobile wallets' to a far greater extend. It seems that Pay-Buy-Mobile, and RFID payments, has a good chance to become the leading payment system, because it offers a much more user-friendly experience.
Mobile commerce is growing fast and, according to the DMA, 35% of users already engaged in mobile commerce. So we are not only certain to see a big change ahead, but we also think that it might be just around the corner.
