The evolution of mobile payments
Technologies are torn by leaps and bounds ahead, they have time to evolve and bring convenience and reliability to our lives. Literally the other day, Techcrunch published a wonderful article “The evolution of the mobile payment” , which I decided to share with Habr's readers.
It is projected that the number of mobile phone users by the end of 2016 will be 4.8 billion people. Recent studies have shown that about 39% of users in the United States in 2015 made at least one payment using mobile payment systems. For comparison: in 2014 this figure was 14%, and by the end of 2017 it is expected that it will reach 70%. Such explosive growth and the availability of potential for even greater growth give reason to believe that this industry is in for rapid development. In order to understand how this industry can soar, it is necessary to recall the history of the development of mobile payments and how it evolved.
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Throughout its history, mankind has always relied on various payment systems to pay for goods and services. It all started with a barter system: cattle, cereals. Then money went into circulation - shells, pieces of tanned leather, gold, metal coins, paper notes, the US dollar, payment cards, credit cards, and, finally, electronic payments. All these transformations were aimed at one vector - increasing usability and versatility. These preferences began to take shape at the beginning of the 20th century, when payment cards appeared.
Payment cards were first mentioned by Edward Bellamy in 1887 in his famous Utopia novel “Looking back,” but became reality only in 1921; Western Union clients became their first users. Soon, many department stores, service stations and hotels also began to offer their customers payment cards to save those from unnecessary visits to the bank.
After the release of the Diners Club card in 1958, the credit card industry began to resemble what we have today. The first credit card issued by a third-party bank was BankAmericard, and it happened in 1958. This card was turned into Visa in 1977. Then came the videotex system (late 1970s - early 1980s); Internet banking (1994); mobile payment system WAP (1997), and the modern influx of mobile payment applications.
Here is how the development of mobile payment technologies took place at the end of the 20th - at the beginning of the 21st century:
1983 : David Chom, an American cryptographic specialist, begins work on creating electronic money and invents a "discouraging formula that is a continuation of the RSA open-source cryptographic algorithm that is still used in web encryption." This is the very beginning of cryptocurrency.
1994 : Although this fact is disputed, some believe that the first online purchase - pizza with pepperoni and mushrooms Pizza Hut - occurred this year.
1998 : PayPal is founded.
2003 : Worldwide, 95 million people made purchases using their mobile phones.
2007 : The iPhone and Droid operating systems entered the market.
2008 : Bitcoin invented.
2011 : Launch of Google Wallet.
2014 : Launch of Apple Pay. A year later, Android Pay and Samsung Pay came out.
2020 : It is expected that 90% of smartphone owners will use mobile payments. There are estimates that by 2017, sales made using mobile payment systems will amount to $ 60 billion.
There are three types of mobile payments. The first is when a customer visits a website, adds a product to the cart, places an order and receives his purchase with a check. There are still contactless payments - when the transaction information is stored on the device and the PIN code is required to complete it. And, finally, mobile wallets that are able to replace the traditional wallet and store all the information on the payments made.
Within each of the types of mobile payments described there are various variations. For example, in the case of a mobile application, when buying from a particular supplier, payment is made on the user's device, as, for example, in the case of the Starbucks application. In the case of a merchant's payment terminal, the payment data is not saved. Online payment services, such as PayPal, use a user's device when purchasing goods. Mobile client-to-customer funds transfer services, such as Venmo, also use a user device to make a bank transfer. Do you think the volumes are not great? Venmo reported on making transfers of more than $ 1 billion in January 2016 only.
And do not think that mobile payments will be limited to smartphones and tablets.
Bluetooth technology with low power consumption (BLE) allows you to make calculations, as with the use of the device of the buyer and the seller. In the latter case, the data is stored on a special mobile payment account. An example would be PayPal and iBeacon beacon. Well, and finally, there is wireless high-frequency communication (NFC) technology — everything here also happens on the user's device; data is stored on a mobile device and used to purchase items. This technology is used by Apple Pay, Android Pay and Samsung Pay mobile wallets. A typical example of a startup development is the following scheme: SMS service - mobile application - contactless payment system.
BLE and NFC technologies are used to communicate beacons and NFC tags with customer devices. In the case of BLE, it is possible to maintain long-term communications that can be used in large areas, and customers can receive notifications and coupons. NFC is activated by the buyer and is more suitable simply for organizing one-to-one communication.
With the entry into the game of an increasing number of large brands, the mobile payment market is undergoing significant changes. Vendors use the latest technology and adapt their applications to ensure the most comfortable implementation of mobile payments.
For example, recently Google introduced a new application Hands Free. It uses to work as Bluetooth, and Wi-Fi, and the feature is that the phone can not get out of pocket. Google is also working with the system of identification of the person on the face.
Banking sector giants do not stand aside: JPMorgan Chase & Co., Bank of America Corp., Wells Fargo & Co. and US Bancorp have created a clearXchange payment system that allows customers to instantly transfer funds between accounts of different banks using a mobile phone.
Experiments conducted at Google are not exceptional; Providing maximum convenience and security of payments is the main trend in the mobile payments industry. As for the “pay” option, Apple, Android and Samsung are nothing more than the tip of the iceberg. More and more information technology companies are developing their own platforms for mobile payments. Wearable electronics manufacturers in line. Do not think that mobile payments will be limited to smartphones and tablets; Soon you can pay for the purchase using, for example, Jawbone UP4, bPay band and Lyle & Scott bPay jacket.
Retail chains such as Wal-Mart Stores Inc. also don’t want to stand aside and develop their own products that support mobile payments. For example, this concerns the use of geolocation data for sending out coupons and special offers. Bloomberg Technology writes: "consulting company eMarketer predicts an increase in the turnover of transactions made by connecting a mobile phone to a payment terminal in the store to a level of $ 210 billion, compared with $ 8.7 billion in 2015".
Retail networks and banks are going to make a serious competition to Apple Pay and Android Pay; For consumers and businesses, this primarily means greater variability in making mobile payments and bank transfers. Another interesting trend is the growth of mobile payments using cryptocurrency and chains of transaction blocks. The technology behind Bitcoin has recently become one of the most discussed topics. In fact, it is expected that tokenization will make a real revolution in the financial industry.
Companies such as Movile have already seen the potential of using Bitcoin for payments in online gaming services, and also as an alternative currency for mobile payments in emerging economies, such as Brazil. Perhaps the greatest potential lies in the technology of electronic money. Many consider the transaction block chains to be the technology on the basis of which “a new generation of transactional applications will be built that provide the required level of efficiency while maintaining a high level of reliability and transparency” - an ideal combination of characteristics for the growing popularity of mobile payments among mobile phone users and for business.
Social networks and instant messengers also join the fun. You will be able to make purchases directly from mobile applications of social networks, for example, Facebook and use WhatsApp as a channel for commercial activities. Using the big data toolkit, sellers will be able to send out coupons to a target audience, organize promotions and make flash sales, and even place pre-orders.
Regulations can be set in such a way that this leads to global standardization. Currently, there is no global standard for mobile payments, but there is an initiative (supported by the author of this article) to create a single standard that would contain the same set of standards for all countries. Such a move can change the rules of the game and help the development of payment technologies in general, and mobile payments in particular, around the world. With companies like Venmo processing mobile money using a client-client scheme of more than $ 1 billion a month, and thousands of companies like Square processing billions in mobile payments, the mobile payments industry promises to be the fastest growing sector.
There is enough space in the market for everyone, but before everything works out, there are still many issues to deal with, including security issues. Despite this, the convenience and speed of transactions continues to attract more and more people, so the forecast of 90% of users making a mobile payment by 2020 does not seem incredible.
It is projected that the number of mobile phone users by the end of 2016 will be 4.8 billion people. Recent studies have shown that about 39% of users in the United States in 2015 made at least one payment using mobile payment systems. For comparison: in 2014 this figure was 14%, and by the end of 2017 it is expected that it will reach 70%. Such explosive growth and the availability of potential for even greater growth give reason to believe that this industry is in for rapid development. In order to understand how this industry can soar, it is necessary to recall the history of the development of mobile payments and how it evolved.
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Brief history of mobile payments
Throughout its history, mankind has always relied on various payment systems to pay for goods and services. It all started with a barter system: cattle, cereals. Then money went into circulation - shells, pieces of tanned leather, gold, metal coins, paper notes, the US dollar, payment cards, credit cards, and, finally, electronic payments. All these transformations were aimed at one vector - increasing usability and versatility. These preferences began to take shape at the beginning of the 20th century, when payment cards appeared.
Payment cards were first mentioned by Edward Bellamy in 1887 in his famous Utopia novel “Looking back,” but became reality only in 1921; Western Union clients became their first users. Soon, many department stores, service stations and hotels also began to offer their customers payment cards to save those from unnecessary visits to the bank.
After the release of the Diners Club card in 1958, the credit card industry began to resemble what we have today. The first credit card issued by a third-party bank was BankAmericard, and it happened in 1958. This card was turned into Visa in 1977. Then came the videotex system (late 1970s - early 1980s); Internet banking (1994); mobile payment system WAP (1997), and the modern influx of mobile payment applications.
Here is how the development of mobile payment technologies took place at the end of the 20th - at the beginning of the 21st century:
1983 : David Chom, an American cryptographic specialist, begins work on creating electronic money and invents a "discouraging formula that is a continuation of the RSA open-source cryptographic algorithm that is still used in web encryption." This is the very beginning of cryptocurrency.
1994 : Although this fact is disputed, some believe that the first online purchase - pizza with pepperoni and mushrooms Pizza Hut - occurred this year.
1998 : PayPal is founded.
2003 : Worldwide, 95 million people made purchases using their mobile phones.
2007 : The iPhone and Droid operating systems entered the market.
2008 : Bitcoin invented.
2011 : Launch of Google Wallet.
2014 : Launch of Apple Pay. A year later, Android Pay and Samsung Pay came out.
2020 : It is expected that 90% of smartphone owners will use mobile payments. There are estimates that by 2017, sales made using mobile payment systems will amount to $ 60 billion.
Types of mobile payments
There are three types of mobile payments. The first is when a customer visits a website, adds a product to the cart, places an order and receives his purchase with a check. There are still contactless payments - when the transaction information is stored on the device and the PIN code is required to complete it. And, finally, mobile wallets that are able to replace the traditional wallet and store all the information on the payments made.
Within each of the types of mobile payments described there are various variations. For example, in the case of a mobile application, when buying from a particular supplier, payment is made on the user's device, as, for example, in the case of the Starbucks application. In the case of a merchant's payment terminal, the payment data is not saved. Online payment services, such as PayPal, use a user's device when purchasing goods. Mobile client-to-customer funds transfer services, such as Venmo, also use a user device to make a bank transfer. Do you think the volumes are not great? Venmo reported on making transfers of more than $ 1 billion in January 2016 only.
And do not think that mobile payments will be limited to smartphones and tablets.
Bluetooth technology with low power consumption (BLE) allows you to make calculations, as with the use of the device of the buyer and the seller. In the latter case, the data is stored on a special mobile payment account. An example would be PayPal and iBeacon beacon. Well, and finally, there is wireless high-frequency communication (NFC) technology — everything here also happens on the user's device; data is stored on a mobile device and used to purchase items. This technology is used by Apple Pay, Android Pay and Samsung Pay mobile wallets. A typical example of a startup development is the following scheme: SMS service - mobile application - contactless payment system.
BLE and NFC technologies are used to communicate beacons and NFC tags with customer devices. In the case of BLE, it is possible to maintain long-term communications that can be used in large areas, and customers can receive notifications and coupons. NFC is activated by the buyer and is more suitable simply for organizing one-to-one communication.
Changes in the market of mobile payments
With the entry into the game of an increasing number of large brands, the mobile payment market is undergoing significant changes. Vendors use the latest technology and adapt their applications to ensure the most comfortable implementation of mobile payments.
For example, recently Google introduced a new application Hands Free. It uses to work as Bluetooth, and Wi-Fi, and the feature is that the phone can not get out of pocket. Google is also working with the system of identification of the person on the face.
Banking sector giants do not stand aside: JPMorgan Chase & Co., Bank of America Corp., Wells Fargo & Co. and US Bancorp have created a clearXchange payment system that allows customers to instantly transfer funds between accounts of different banks using a mobile phone.
Experiments conducted at Google are not exceptional; Providing maximum convenience and security of payments is the main trend in the mobile payments industry. As for the “pay” option, Apple, Android and Samsung are nothing more than the tip of the iceberg. More and more information technology companies are developing their own platforms for mobile payments. Wearable electronics manufacturers in line. Do not think that mobile payments will be limited to smartphones and tablets; Soon you can pay for the purchase using, for example, Jawbone UP4, bPay band and Lyle & Scott bPay jacket.
Place in the market is enough for everyone
Retail chains such as Wal-Mart Stores Inc. also don’t want to stand aside and develop their own products that support mobile payments. For example, this concerns the use of geolocation data for sending out coupons and special offers. Bloomberg Technology writes: "consulting company eMarketer predicts an increase in the turnover of transactions made by connecting a mobile phone to a payment terminal in the store to a level of $ 210 billion, compared with $ 8.7 billion in 2015".
Retail networks and banks are going to make a serious competition to Apple Pay and Android Pay; For consumers and businesses, this primarily means greater variability in making mobile payments and bank transfers. Another interesting trend is the growth of mobile payments using cryptocurrency and chains of transaction blocks. The technology behind Bitcoin has recently become one of the most discussed topics. In fact, it is expected that tokenization will make a real revolution in the financial industry.
Companies such as Movile have already seen the potential of using Bitcoin for payments in online gaming services, and also as an alternative currency for mobile payments in emerging economies, such as Brazil. Perhaps the greatest potential lies in the technology of electronic money. Many consider the transaction block chains to be the technology on the basis of which “a new generation of transactional applications will be built that provide the required level of efficiency while maintaining a high level of reliability and transparency” - an ideal combination of characteristics for the growing popularity of mobile payments among mobile phone users and for business.
Social networks and instant messengers also join the fun. You will be able to make purchases directly from mobile applications of social networks, for example, Facebook and use WhatsApp as a channel for commercial activities. Using the big data toolkit, sellers will be able to send out coupons to a target audience, organize promotions and make flash sales, and even place pre-orders.
Regulations can be set in such a way that this leads to global standardization. Currently, there is no global standard for mobile payments, but there is an initiative (supported by the author of this article) to create a single standard that would contain the same set of standards for all countries. Such a move can change the rules of the game and help the development of payment technologies in general, and mobile payments in particular, around the world. With companies like Venmo processing mobile money using a client-client scheme of more than $ 1 billion a month, and thousands of companies like Square processing billions in mobile payments, the mobile payments industry promises to be the fastest growing sector.
There is enough space in the market for everyone, but before everything works out, there are still many issues to deal with, including security issues. Despite this, the convenience and speed of transactions continues to attract more and more people, so the forecast of 90% of users making a mobile payment by 2020 does not seem incredible.
Source: https://habr.com/ru/post/305910/
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