more-arw search

Mobile Payments: Expanding but not Conquering

Mobile phones are at the center of today's communications technologies. There's no question about the direction smartphones are now taking the world in. As of February, roughly half of cellphone users owned a smartphone, according to

Mobile phones are at the center of today's communications technologies. There's no question about the direction smartphones are now taking the world in. As of February, roughly half of cellphone users owned a smartphone, according to Nielsen. Gone are the days where mobile devices were strictly used for calls or even just texts and email. Androids and iOS-supported phones enable consumers to do virtually anything, from social networking to shopping and video conferencing to sharing documents.

Between workforce use and consumer demand for it, industries are adapting to mobile and financial institutions are grappling with the emergence of mobile payments, which is a growing billion dollar industry. For cardholders and merchants, the ability to pay via phone is opening the door to efficiency, practicality and ease.

Understanding where mobile payments are
CNN's investigation project, "Our Mobile Society" estimates the mobile payment industry is currently worth $171 billion, with more consumers and merchants signing up every day. In fact, IDC Financial Insights' "Technology Selection: Worldwide Mobile Payments 2012-2017 Forecast” expects purchase volume over mobile devices to to exceed $1 Trillion by 2017. As of now however, mobile payment solutions only work on certain phones, and many haven't reached the level of feasibility or massive presence needed to become a mainstream payment method. They won't be replacing wallets anytime soon. While Google and PayPal were early pioneers, in an atmosphere where credit and debit fees continue to rise, more companies like Bank of America, Walmart and Guitar Center are either creating their own app or creating partnerships with payment services so customers can use their phones at store registers. In an mobile payments also allow merchants to track marketing and advertising opportunities.

Impact on Financial Institutions
"The growing prevalence of smartphones is enabling a variety of mobile payment methods, which combined are becoming a significant share of global commerce," said Aaron McPherson,practice director and IDC report main author.

The forecast states the outlook for many financial institutions is positive because the vast majority of mobile payments volume will be driven by traditional card products, either through mCommerce- mobile commerce- or through near field communication (NFA). The forecast authors recommend banks, accounting firms and other similar organizations view mobile payments as an opportunity to leverage data on customers' purchasing habits.

"Mobile operators and device manufacturers have given banks unprecedented access to their customers at all times and in all places," IDC states. Financial institutions may consider implementing targeted marketing and rewards programs to boost client loyalty. In addition, firms should consider incorporating risk management and financial services into proximity payments.

Associated risks
As more players enter the field of mobile payments, the risks associated with them become increasingly diverse and complex. Personal data such as PIN numbers, security codes, passwords linked to credit cards and bank accounts are saved on phones or over a wireless network, which frightens many consumers.

The most obvious risk is losing one's phone, especially if apps require little password protection. Wallets face the same risks, however while they're often secured in pockets or purses, phones get left behind, carried in hand and placed on surfaces in public.

Secondly, because mobile payment methods are so diverse and still developing, regulators are having a tough time testing and implementing general security measures. There always a slight chance a hacker can intercept a wireless transmission between a smartphone and a payment receiver.

Financial institutions implementing some form of mobile payment need to ensure they're backing technology that provides the same security customers expect from any other form of payment. It's also important to keep in mind clients may view purchase history tracking as a breach of privacy.

Share what you think: How do accounting firms approach mobile payments?