Proceed to Checkout: Payments on the Mobile Web
Published: September 19, 2011
ABI research has estimated that mobile payments will grow to $119 billion in 2015. As mobile shopping continues to grow, merchants, banking and credit companies, mobile service carriers, and third-party software companies are looking for better payment solutions for making online purchases. Today, making payments on the desktop Web and on the mobile Web is similar, using either real-world payment methods, as shown in Figure 1, or online payment services like Google Checkout, BillMeLater, or PayPal, as shown in Figure 2.
Figure 1—Amazon’s payment page
Figure 2—Blue Nile’s checkout options
Considering how different the screen sizes are for computers—most of which have a screen resolution of 1024x768—and mobile phones—whose screens are tiny, with even smartphones often having a screen resolution of only 320x480—as well as their very different contexts of use, how can we optimize payment methods for mobile devices?
Issues with Real-World Payment Methods on Mobile Devices
There are several issues with using real-world payment methods on mobile devices. First, it’s a pain. While it might not be too difficult to type in a credit-card number on a smartphone if you remember the number, when you need to hold both your phone and your credit card, it becomes a challenge.
Another issue relates to security and privacy. It’s one thing to type your credit-card number into a check-out form when you’re sitting in the privacy of your own home. It’s quite another thing when you’re sitting in a busy coffee shop, using your smartphone to purchase a deal that you just saw on Groupon. In public, holding your credit card while you type its number is definitely not one of the safest things to do.
Finally, some people are not credit-card holders. Teenagers who don’t have credit cards or debit cards comprise a large proportion of mobile users. As the ABI research points out, teenagers are the primary consumers of virtual goods for video games, so they need some means of purchasing them. The larger population from countries outside the US, where credit cards are not as popular, encounter the same issue.
Issues with Virtual Online Payment Methods on Mobile Devices
Virtual payments seem to be a better solution for mobile devices, because they eliminate the necessity of having any type of credit or debit card. PayPal’s mobile payments have increased from $25 million in 2008 to $141 million in 2009 and are continuing to grow. Google Checkout recently released a Chrome browser extension, Google Checkout Android Payment, shown in Figure 3, that lets Android users make payments on their smartphones. Since the mobile-payments market is so attractive, two more ecommerce giants are trying to get into the game. With its payment system that lets people use one button to check out, shown in Figure 4, Amazon is trying to take advantage of its large user base. As Figure 5 shows, Apple is trying to leverage the momentum of their success with their iTunes store and the popularity of the iPhone in the US.
Figure 3—Google Checkout on an Android phone
Figure 4—Amazon payment system
Figure 5—iTunes checkout on an iPhone
Besides the obvious advantages of not needing to have a credit or debit card or enter a card number, virtual payment methods also allow people who aren’t card holders, such as teenagers, to be able to pay for goods on their phone. For example, teenagers might have a virtual-payment account that their parents have set up, with parent-imposed spending limits.
Credit-card companies offer several types of account protection, as well as fraud-control features. Virtual-payment services such as PayPal are continually evolving to meet user expectations and now offer improved features such as seller and buyer protection. But there are still safety issues.
However, the toughest challenge for virtual payments is cross-platform implementation and standardization. Google Checkout’s Chrome extension is available only to Android users who already have a Google Checkout account. PayPal requires both merchants and buyers to have a registered and verified PayPal account in order to make transactions. So, what would be the best way to integrate payment methods with the current smartphone platforms? With a browser extension like Google Checkout, a soft button on an ecommerce site’s checkout page, or a physical button on a mobile device?
Payment Methods Integrated into Mobile Devices
Wireless carriers are letting their customers purchase items using their phone number and adding the charges to their phone bill. Letting customers pay by phone reaches not only people who don’t have a credit card, but also people who don’t even have a banking account, which is quite common in certain parts of developing countries. Mobile phone users can go to retail stores to add funds to their phone, then use their phone number to make purchases. Numerous third-party software tools are available for this purpose, including Paymo, shown in Figure 6, Boku, Daopay, shown in Figure 7, and Zong.
Figure 6—An illustration depicting paying with Paymo using a phone number
Figure 7—An illustration of Daopay’s payment system
Paying by phone and having a charge added to your phone bill is nothing new. This mode of payment is already in wide use in Asia and Europe. In the US, however, paying by phone is still in its developmental stage, mostly because of the revenue-sharing systems that are prevalent here. Making this happen in the US would have to involve multiple parties. There are currently a number of initiatives underway to implement this mode of payment in the US, mainly involving three types of parties: mobile phone manufacturers—for example, Nokia Money; banks—as with MasterCard MoneySend; and mobile service carriers such as Verizon and AT&T. It is the service carriers who would have to play the central role if making payments by phone is to become the trend of the future in the US.
Safeguarding this mode of payment requires that mobile phone operating systems address personal privacy and identity protection. In the past, if you lost your phone, you’d lose only your personal contacts. These days, if you lose your phone, you risk losing your virtual wallet that’s on your phone, too. Banks need to offer the kinds of credit and fraud protection for payments by phone that credit-card holders currently have. Adopting this mode of payment doesn’t involve any standardization issues or platform wars. It’s really just the revenue-sharing model that is currently impeding the process. Determining how service carriers, banks, and mobile phone manufacturers are going to work together is key.
What the Future Holds
In the US, virtual-payment services such as PayPal seem to have the greatest potential. Because they offer more freedom and flexibility and can cater to the needs of a large range of audiences, they appeal to more people. They serve the needs of early adopters who want to do all of their shopping on their mobile device, as well as conservative shoppers who want the freedom to choose to shop on the Web either on their computer or on their mobile phone, according to their current needs.
One possible solution for all of the challenges and issues I discussed earlier would be for virtual-payment services like Amazon, PayPal, Google Checkout, and iTunes—who hold banking information for a large number of users—to work together with banks to come up with a seamless solution that would let people use their virtual-payment accounts, while still receiving the protection of a credit card.
Another potential solution would be collaboration between virtual-payment services and the developers of mobile operating systems to move the burden of incorporating all of the different payment methods from individual merchants to the operating systems. So, rather than merchants’ needing to include these payment methods on their mobile Web site’s checkout page, each smartphone could have a payment function that would let users customize how they want to make payments using their smartphone. When making a purchase, they would simply use this payment function, and their transaction would go through, using their preferred method of payment.