Barriers piggyback payments convergence

The emergence of new technologies in the mobile device and electronic payments realms suggest it is only a matter of time before the two converge into a single market. But when traditional payment products transition into mobile payment apps, and transactions are initiated not by plastic cards but by quick response codes, new difficulties arise. Judging by recent developments in the payments industry, current problems include data security weaknesses and slow adoption rates by consumers and merchants alike.

Nicholas Cucci, Certified Fraud Examiner at Network Merchants Inc., said the mobile commerce market is expected to reach $235.4 billion by the end of 2013, up by 44 percent from 2012. But he noted payment providers are slow to introduce new solutions because of a few market barriers. One obvious challenge has been the age-old issue of consumer data security protection.

Cucci believes contactless in-store payments may actually help aid fraudsters. Consumers can pay for purchases with near field communication-enabled cards at POS systems integrated with Visa Inc.'s payWave, MasterCard Worldwide's PayPass, Discover Financial Services' Zip and American Express Co.'s ExpressPay. But contactless cards are vulnerable to attack from fraudsters who can use inexpensive equipment to capture data from cards simply by walking past cardholders.

Streamline ID authentication

But payment experts aren't wasting time trying to identify more secure solutions. Mobile device security firm mopay Inc. recently launched a carrier-based pilot project in partnership with mobile telecommunication providers Telefonica SA and Vodafone Group PLC. The pilot allows mopay's customers in the German market to conduct mobile-based, in-store transactions with a single tap from mobile devices.

The solution simplifies a process that previously required at least three steps. The technology uses an enhanced user profile to create an anonymous authentication ID, keeping the user's actual identity concealed. This innovation also provides for a shorter mobile purchase process that mopay hopes will pay off in greater conversion rates.

Simplify m-payment acceptance

Another less obvious barrier to the wider adoption of mobile commerce is in the area of micro-merchants and small businesses. While consumer demand for mobile-based transactions might be rising, economic issues have kept said businesses from adopting alternative payment products. This barrier will eventually slow consumer adoption rates, and perhaps even slow down market advancements, in the area of mobile commerce.

In response, MasterCard recently launched a new product called Simplify Commerce. According to its June 27, 2013, press release, Simplify Commerce is "a new product that makes it easy to accept e-commerce and mobile commerce payments, regardless of payment brand, in a matter of minutes."

The solution is aimed at providing an easy-to-integrate, wrap-around payment acceptance scheme for smaller merchants who may not have the resources to set up traditional payment systems. By using a common application programming interface and software development kit, developers can quickly set up secure online and mobile payments for small business customers, MasterCard said.

Invention spurs innovation

As consumer adoption of online and mobile commerce continues to rise, the payments industry will be further pressed to supply innovative solutions to overcome these and other yet unforeseen barriers. In fact, the need for groundbreaking technologies creates opportunities for the next wave of innovators. Perhaps these solution providers will be from security-centric industries or from legacy experts in traditional commerce. But the potential exists that new solutions will provide consumers with more secure and easier access to contactless and mobile payments.

Editor's Note:

The Green Sheet Inc. is now a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals. Click here for more information.

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.