Impact Of Mobile Payments On Small Businesses

Mobile payments covers a variety of solutions which are still emerging and being brought to market

. The term covers such things as:

1.Online payments using a browser on a mobile device - similar to eCommerce and often termed mCommerce

2.In-app payments on a mobile device - Apple earn strong revenues here

3.NFC enabled mobile devices for contactless payments - especially in retail sector

4.Payments using the telco - where the payment goes on to the mobile bill from the service provider

5.Premium SMS rated payments

6.Mobile virtual terminal - taking card payments using a mobile device instead of a traditional hardware terminal

In many places, including Ireland, one of the areas set for growth is in the NFC space. New NFC-enabled debit cards are already being issued and once the hardware is available in retail units, these may become the primary means of paying for smaller value items, typically up to 15. This is a new technology for small retail businesses but is in their favour as it will reduce the costs of handling cash and should also speed up payments at checkouts. Authentication is generally not required and this speeds up the payment process. For this reason this technology may well become a popular mobile payments model. However, how well it takes off will also depend on the charging model. Consumers will pay for convenience but in cash-strapped recessionary times, if the charge is too high cash will still be king.

For small businesses one of the more interesting models to surface is the last one. With this mobile payments model, the mobile phone is turned into a payment terminal using an app. Card payments can be accepted easily and in some solutions a reader is attached for easy swiping of the card and so the card details are not required to be manually entered. In the US where chip and pin solutions are not used, this is the method often used. In Europe payments are slightly different. One of the big advantages for small businesses is the removal of the hardware cost associated with purchasing or renting a POS terminal. With the massive increase in penetration of smartphones, particularly iPhone and Android devices, many small businesses already have a terminal at their disposal.

Many small businesses have traditionally found the overheads of taking card payments prohibitive but this model gives them access to card payments and this can have a significant positive effect on their cash flow. The ability to take card payments in any location removes the dependence on customers having cash or cheques. It also removes the overhead in following up on unpaid invoices, itself a costly exercise for many small businesses.

In the US, card issuers, processors and payment networks compete for a percentage of the transaction. The payments ecosystem is quite developed. However, in developing economies commerce is more cash-based and the leap to mobile payments from cash may cut out the credit card companies from the equation. In many African countries for example cash is moving to mobile micro-payments and wallet-type solutions.

The course that mobile payments are going to take is not yet clear. What is agreed by most is that mobile payments will change radically the way that payments work. What is potentially industry-shifting is the way in which the major players in this new mobile world - the telecoms, technology and financial industries - may all have their roles changed. According to one report the greatest gains to be made in mobile payments will be from cross-industry partnerships.

Who will the winners will be?

by: Sinead Murphy

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