Mobile Payment Services - Fraud Library

The Fraud Practice eCommerce Mobile Payment Consulting Services

Mobile payment (m-Commerce) is a new and rapidly-growing alternative payment method - especially in Asia and Europe. Instead of paying with cash, check or credit cards, a consumer can use a mobile phone to pay for a wide range of services and digital or hard goods. According to Juniper Research, mobile payments are expected to reach more than $600 billion globally by 2013. This presents a huge opportunity for providers of such services and merchants that want to attract new consumers. But where are these payments making the most progress?

The top three regions for mobile payments will represent over 70% of the global mobile money transfer value by 2013. In a recent study by Harris Interactive, almost half of Americans (45%) are willing to shop via their mobile phone which they consider to be a safe option. The younger audience, between the ages of 18- to 34-year olds, is in particular acceptance to the idea on mobile shopping with 59% considering it to be safe. Mobile payments have also been shown to be effective in micropayments. Merchants must utilize this channel of payment to reach and capture a subscriber base that will undoubtedly grow in the next few years. As consumers and merchants start to further recognize the convenience, safety and efficiency of this method there will be a dramatic increase in its worldwide adoption.

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Mobile Payment Services

How Good is it?

In general mobile payments are a quick, easy and safe payment method for conducting ecommerce transactions. While mobile payments are relatively new they have already generated an enormous buzz and market interest. Mobile payment providers have been shown to use three distinct models for conducting online payments. The three common models are SMS based transactional payments, direct mobile billing and mobile web payments. Each of these methods have limitations and benefits associated with them.

The market leaders in the alternative payment landscape such as PayPal, Google Checkout and Amazon have made significant investments into expanding this portal for payment. These firms have put fourth a tremendous amount of time, effort and money to developing these systems. This trend would suggest that all of these players believe market potential will become reality...

• Transactions can occur in remote places with little to no infrastructure.

• Secure and personal.

• More cell phones than computers in the world.

• Proven success in extremely different environments around the world.

Considerations When Implementing or Buying This Functionality    

• Adoption is still in it's infancy.

• Can mobile payments add value to the merchants' payment methodology?

• Is the mobile payment service susceptible to market fluctuations?

• How are mobile payments utilized and recognized by customers in the market?

• What is the payment trend in the vertical you are operating?

• How does the cost savings compare to other methods that are currently utilized?

Estimated Costs – Costs may vary based on the vendor you select. However, the fees that are charged are relatively cheaper than payment aggregators and credit cards. The long-term success of mobile payments has shown the most success in the developing regions of the world. Typically the value added benefits of increasing your sales channel will outweigh the costs that are associated with accepting mobile payments.

Alternative Solutions – Payment aggregators, ACH payment and credit cards are the most popular form of alternative payment solutions to mobile payment services. Specifically, there are no clear substitutes to mobile payment methods because of m-commerce's unique blend of finance and mobile communications.

If you are in the market for new alternate payment options you should consider purchasing our Guide to Alternate Payment Options. A Guide to Alternative Payments is a prepared research document, 99 pages in length, intended to provide organizations an overview of the eCommerce alternative payment options and markets.  The Guide goes beyond a general market assessment to provide information businesses need to assess solution options and service providers.  The Guide also includes easy-to-understand reference tables on regional service providers (over 100 service providers), preferences and capabilities.

How Does it Work?  

Mobile payment services come in four varieties such as SMS based transactions, direct mobile billing, mobile web payments and RFID payments.

SMS based transactions are where the consumer sends a payment request through an SMS text message to a SMS shortcode (special telephone numbers typically shorter than a full traditional number) and a premium charge is applied to their phone bill. The merchant is informed of the payment and then can release the goods to the consumer. This form of transactional payment was popular but has lost popularity due to poor reliability, slow speed, high cost and low pay-out rates.

Direct mobile billing is where the consumer uses a mobile billing option during checkout at an ecommerce site such as an online gaming site to make a payment. After authentication involving PIN and Password, the consumer's mobile account is charged for the purchase.

Mobile web payments is where the consumer uses web pages on their mobile phone to make payments. This method can utilize credit cards and payment aggregators (such as PayPal).

Radio Frequency Identification (RFID) payments are a type of Near Field Communication (NFC) that allow mobile users to make a payment by swiping their phone close to a reader. Just like using a credit card, the paid amount will be deducted from the user's bank account at the time of transaction. Another plus is that RFID mobile payments will permit the user to access several bank accounts from the mobile, which results in much more flexibility for the end user.

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