The technological innovation of the last few years has contributed to the success of smartphones whose functions have improved hand-in-hand. Now we do everything with our phones, including paying for purchases in store and on-line.
Mobile payments, also called m-payments, are payments made via mobile device, smartphones and, less frequently, tablets. We can identify two distinct cases of use of mobile payments: the first requires closeness between the seller and the buyer and, in this case, we are talking about proximity mobile payments - also proximity payments - while in the second case, also called mobile remote payments - payment takes place remotely; the most widely recognised platforms that offer this type of service are, for example, HYPE, Apple Pay and Google Pay. We are talking about proximity payments also when we refer to payments using contactless cards, in this case, however, we are not dealing with mobile payments because it does not require the use of a device.
Often, these platforms offer both payment methods in certain cases with hybrid user experiences, consider, for example, Alipay which, among its payment methods allows the customer to pay by scanning a QR Code, shown by a POS (therefore in proximity) or on a display that could be anywhere in the world.
In order to make mobile payments, essentially two elements are needed: a smartphone or a tablet and a certified platform for this type of service which may be installed or already integrated in the device.
In order to make proximity mobile payments, you need to bring your mobile phone, which must be equipped with a NFC chip, close to a device able to receive and process the payment - typically a POS or a totem - or access the payment app and, depending on the user experience offered, the transaction is finalised.
There are many mobile payment applications, each one with different payment methods. For example, Alipay also enables the acquirer to create a payment QR code which, in this case, will be scanned by the merchant with a bar code reader. HYPE instead allows users to pay by selecting the sales point from a list of those in the vicinity - thanks to smartphone geo-location - but also by inserting a unique code that identifies it; moreover, by associating the physical or virtual prepaid card of HYPE to a wallet like Apple Pay or Google Pay, it is also possible to make proximity mobile payments.
By contrast, what does the merchant need? The answer depends on which mobile payment platforms you wish to accept. For the main digital wallets, those that we have already mentioned previously, having an authorised POS is enough, which, therefore, offers these more innovative solutions alongside the more traditional payment instruments such as the card and "bancomat". Once the payment has been processed, the income from the sales will be credited to the current account.
For other instruments, for example PayPal, it is necessary to set up an account into which funds will also be deposited. Some platforms have been created in pure digital mode for the world of E-commerce and then have developed payment solutions in the physical world, others instead - created more recently - have been designed and created to immediately respond to the needs of omni-channel customers, who interact with the brands in a process that involves several touch points, different channels and continuously.
Mobile payments are being favoured by the public nowadays all over the world, thanks to the increasingly more widespread use of smartphones. They are the natural evolution of digital payment instruments which were introduced at the end of the 1990s, a period in which the Internet became a mainstream channel throughout the entire western world.
At the end of 2019, there were more than 900 million active users of mobile payment apps worldwide, marking an increase of 13.5% YoY¹. China is on top of the ranking of countries with the greatest penetration of these instruments, with over 80% of smartphone holders using these types of services.
Alipay is one of the most widely used apps in China, the engine of the Alibaba Group's ecosystem which, thanks to one billion users, is the largest digital wallet in the world. The unique feature of this service, in addition to the payment methods we have already discussed, is that the merchant can accept payments from over 300 million wallets in Asia and Europe, while users have more than 100 additional services at their disposal, not just financial.
India is also worth mentioning, among the countries with the greatest potential in terms of the adoption of mobile payments; you only need to consider that, at the start of 2019, more than 1.2 billion Indians were registered on the national digital identity program, which includes various innovative payment services².
Many other nations in the world are experiencing a sharp acceleration in the use of these payments, growth which also depends on the strategies of the individual players in this sector - think of communities of Apple and Google users - and the extent of the propensity to use digital services. A penetration ratio may be the ratio between users of mobile payment apps and smartphone owners, which now exceeds 40% in Denmark, 36% in South Korea and Sweden and 27% in the United States.
A recent report from the Innovative Payments Observatory of the Milan Polytechnic³ took a snapshot of the payments status in Italy, with a focus also on the sub-group of mobile payments.
In 2019, of the € 270 billion of digital payments, just over three billion were Innovative Payments, 97% of which were m-payments. Of the € 3 billion spent using these instruments, more than € 1.8 billion was spent in store, by approximately 3 million users (+300% compared to the previous year) for an average transaction value of € 600 (+20% compared to 2018) out of a total 58 million transactions (+272% YoY).
Decidedly less eye-catching statistics but definitely interesting recorded by wearable payments, i.e. proximity mobile payments completed with wearable devices like smartwatches and, more generally smart accessories. Considering the adoption of these devices, certainly not comparable to smartphones, the € 70 million spent last year for a total of 2.2 million payments was an excellent start, especially in the micro-payments domain.
According to the research of the Milan Polytechnic, including outside of the sales point context, mobile payments reached notable levels, with € 1.24 billion spent in 2019, 48% of which for phone top-ups. The most common services paid for using these innovative methods are: car parks (more than € 115 million), shared mobility (more than € 105 million), transport (more than € 43 million) and taxis (more than € 57 million).
The most widely used applications in Italy include HYPE, of which we have already discussed in this article. Some app figures on mobile proximity payments help us to better understand the use of these applications in our country:
In the March-May 2020 quarter, with respect to the previous one, customers that use HYPE as the main account rose, with a growth rate of 71%. The most used functions in the period of social distancing were:
Therefore, mobile payments are already appreciated by the consumer; also for this reason, Axerve, that has always kept a keen eye on developments regarding the consumer and the markets, now already offers all instruments for accepting mobile payments, ideal for structured omni-channel purchase processes thanks to advanced POS terminals and Axerve Pay by Link, but also suited to small sale points that instead can count on the POS Easy offer, which already integrates the main mobile payment platforms, with no additional costs.
¹Global Proximity Mobile Payment Users | eMarketer.com
²Mobile Payments in Italy and worldwide | Mobile Payment & Commerce Observatory of PoliMi
³Innovative Payments: collaboration pays off | Innovative Payments Observatory of PoliMi
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