The Mobile Wallet

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Introduction 

Using one’s handset as a financial tool, or the mobile wallet is an interesting concept which is becoming increasingly popular and integrated across consumer platforms. Not only does it allow users on the move to access financial accounts, but also plays an integral part in the development of digital commerce and banking.

The mobile wallet is proving especially effective in developing countries where desktop access to the Internet and banking opportunities are still a privilege, yet mobile accessibility is extremely high.

Key Terms and Concepts

2D Barcodes    A scannable barcode which can be read by certain mobile applications (by taking a photo of the barcode) and convey information such as a URL etc.
Chargeback    If a transaction is disputed (e.g. goods not received) the bank or service provider will issue a chargeback.
EFT    Stands for Electronic Fund Transfer. The movement of money online between accounts. Often known as mobile money transfer (MMO).
Friction    Obstacles in the buying cycle which may inhibit conversion.
GSM    Stands for Global System for Mobile Communications. Most widely used of the three digital wireless telephone technologies. Uses a variation of time division multiple access.
LBS    Stands for Location Based Services, using a physical location to target an audience.
M-Banking  Stands for mobile banking.
M-Commerce    Stands for mobile commerce, or the buying and selling of goods via mobile devices.
Mobile Ticketing  The issuing and processing of digital tickets via a mobile platform.
Micro-payment    Also known as a nano-payment, mirco-payments are transactions under a specified amount and processed separately.
NFC    Stands for Near Field Communication. A short range connection for communicating between devices.
RFID  Stand for Radio Frequency Identification Chip. A unique device identifier.
Smartphone These handsets have advanced capabilities and allow users to add applications to their phones. They usually have a QWERTY keypad and include 3G and wifi capabilities.
SMS    Stands for Short Message Service. Electronic messages sent on wireless network.
USSD  Stands for Unstructured Supplementary Service Data. Works on all existing GSM phones. Provides session-based communication, enabling a variety of applications.

Mobile Commerce

The number of mobile payment users around the world was estimated at 73.4 million in 2009. While this is an impressive figure, add the many emerging technologies and cross-pollinating platforms and the possibilities multiply.

Over 50 million people in the US are expected to be using mobile devices to do their banking by 2013, and there are many m-commerce specialists working toward better mobile payment solutions.

According to the National Restaurant Association, of the 25 - 34 year old category, 74% say they would make use of an electronic payment system to pay for their meal if available.

Changing the face of e-commerce, mobile payments are available via:

Premium Messages: One of the most common payment systems currently in use, premium message services like Common Short Codes (CSC) allow any GSM device user to make or receive payments.

The Amazon marketplace should be familiar to most Internet users, but Amazon TextPayMe is a platform for transferring funds specifically between mobile phones, using nothing more than SMS and CSCs.

Direct Mobile Billing: This system transfers money directly from the mobile account with the service provider, using the device itself for verification of the Electronic Funds Transfer (EFT).

Increasingly common on e-commerce websites, the mobile billing payment option requires that the user verify the transaction with a PIN code and a password, which is sent to the phone to be entered back into the website.

Mobile Web Payments: Mobile web payments are either made via the mobile device browser or through device software, and can be linked to anything from direct mobile account, credit card or virtual currency account (e.g. PayPal)

Frictionless/Contactless Near Field Communication (NFC): Near Field Communication uses wireless connectivity or machine scanners to transfer data across short distances. One such method for creating frictionless, or contactless NFC transactions is through RFID chips, which are inserted into a device.

The chipped device can be easily scanned by the merchant and the data transferred on the spot. Easier than carrying around an extra card or hard cash, this system not only streamlines processes, but encourages regular transactions.

The benefits of mobile payment platforms:

  • Independent, or linked accounts available.
  • Requires little or no registration.
  • Easy publication and administration of vouchers and special offers for merchants.
  • Much potential for Location Based Services (LBS).
  • Great for tracking and market analytics.
  • Multi-platform transactions.
  • Chargebacks and refunds handled with ease.
  • Cheaper transactions (for both consumer and merchant).
  • Micro-payments and reduced charges increase sales.
  • Global commerce, twenty-four-seven.

Mobile Banking

Online banking spawned many Internet-based financial service providers, delivering specialised services often out of step with traditional, brick and mortar financial institutions.

Traditional banks encompass physical branches and ATMs, while the mobile-breed of financial service operators use the Internet, mobile devices and affiliations with established businesses to service the public in new ways. Now, mobile banking, or m-banking is opening up even more doors.

Specialised m-banking service providers can cater for anything from balance enquiries to portfolio management and even live stock trading. Essentially, this allows consumers to monitor and manage transactions from anywhere.

Great for businesses processes, consumers can also receive real-time SMS alerts via their mobile devices, keeping them informed of any anticipated or even fraudulent transactions as they happen.

Platforms can be developed using any number of GSM functions to deliver m-banking to the community. USSD m-banking platforms, for instance, can allow basic phone users to manage their finances without the need for Internet access or multimedia capabilities.

Developing countries which have an extremely high mobile Internet penetration, such as South Africa, are some of the most in need of m-banking.

One third of the population of South Africa do not have a bank account, but 19% of these people have a pre-paid mobile account. A further 11% have access to the Internet via the phones of friends and family, leading to a high adoption rate of m-banking services.

MTN, one of South Africa’s mobile service providers, has been at the forefront of the country’s m-banking strides. With an MTN MobileMoney account (available online to Nedbank, Standard Bank and ABSA customers), users can manage their finances from anywhere.

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