Monday, 1 February 2016

Mobile payments – why the latest technology may not be such a good idea just yet

By Stanley Epstein

In a recent article (‘Reflections on the fintech revolution’) I referred to technology vendors who constantly harassed the financial services industry with a range of new technologies and tech-solutions leaving it up to the banks to find the problem for their solution to solve.

The reality was that there are dozens of problems and for the most part they are all partially solvable by these new technologies. In truth however many of these solutions are simply just not viable. This is either as a pure business proposition or because somewhere along the line the technology is not quite as perfect as one is led to believe.

Just look at the modern banking scene with its miracle device – the mobile phone.

The mobile phone has, among many other uses given us mobile banking and mobile payments. Many people confuse mobile banking with mobile payments, so let’s put some of the myths to rest before we take another step.

Mobile payments are having either stored value or an electronic version of your credit/debit card on your mobile phone. Nothing really new here – just a different human/system interface in the form of your mobile phone.

Mobile banking is simply putting your old Internet or online-banking onto your mobile as well. Add to it some of the abilities that the technologies on your smartphone gives you, for example a digital camera to image your cheque for deposit, or you for that matter to have a live chat with your own personal banker, plus all the old standbys of bank balances, statements, transfers and payments and the like and – hey presto! We now have a ‘new’ animal called ‘digital banking’ (which of course can all be done from your old fashioned desktop or shiny new tablet too).

About a year ago Apple Inc. announced the development of its mobile payment solution, Apple Pay. Apple Pay is a mobile payment and digital wallet service that allows users to make payments using limited range of Apple iPhone models. Apple Pay will work with Visa's PayWave, MasterCard's PayPass, and American Express's ExpressPay contactless terminals. Users do have to preregister their credit cards for inclusion in the service. Once this is done the service allows use of the credit card or cards without the plastic needing to be present.

Apple Pay is not a new payment system but simply a new way of presenting ones credit/debit card with some high tech validation routines thrown in.

So-far-so good. No need for bulky physical wallets crammed with dozens of plastic cards. Stick them in your iPhone and you are set to go…or are you?

So you don’t have an iPhone (or the right model). Well, two options present themselves. Buy an iPhone or wait until a similar Android mobile payment mechanism appears. Samsung has just unveiled ‘Samsung Pay’. While similar it is not the same as Apple Pay; and it has yet to be launched. No doubt many Samsung mobile models won’t work with their new payment service. So one way or another it’s going to cost you a lot of money.

Other gremlins are lurking too. Battery life on your iPhone (or other smartphone) could prove to be a major headache. After the recent UK launch of Apple Pay TfL (Transport for London) issued a warning to tube, train and bus passengers paying with Apple Pay on iPhones and Apple Watches not to let their batteries go flat or they could get stuck at gates and face penalty fares. Other problems were in evidence too like the speed at which Apple Pay operates and the time it took for the system to authenticate the user and open the gates. This is slower than the less high-tech Oyster card.

As for me? Well I am going to hang onto my credit card a while longer yet.


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