Every day, improvements and advancements are being made that make our lives easier.
Many of these advancements flop, never to be used by the majority of people. Others (like social networks, iPhone apps, etc.) take off, making it difficult to imagine how we ever got around without them.
Mobile payments are about to become another one of these things. And if you haven’t purchased something with your phone or tablet yet, you will probably be doing so very soon.
Not convinced? A prediction made by IDC Financial Insights (an IT research firm) might convince you. The firm predicted (in 2012) that global mobile payments will top $1 trillion in 2017! That’s. A. Lot. Of. Money.
Based on how quickly this trend is gaining traction, the chances of their prediction coming to fruition seem to be pretty good. But what is it exactly that makes mobile payments different than any other trend? And why are they about to become so popular? These are important questions to answer. But first, let’s take a look at the definition of mobile payments. Here’s what Wikipedia has to say:
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“Mobile payment, also referred to as mobile money, mobile money transfer, and mobile wallet generally refer to payment services operated under financial regulation and performed from or via a mobile device.”
Or more simply put, any form of selling anything that is done through a mobile device (iPhone, iPad, tablet, etc.). Now let’s get back to answering those questions. The world is getting to a point where there isn’t much that you can’t do with a mobile device. The more options that these devices have to offer, the more convenient our lives become.
We’ve already seen point-of-sale apps rapidly gain popularity. Smaller (and even some larger) companies utilize them for their easy to use and inexpensive set-up as well as for their convenience (Click here for a conclusive list of POS apps for the iPad).
And considering that mobile payments accounted for about 20% of payments during Black Friday in 2013 (a percentage that is predicted to jump to 1/3 of total holiday shopping in 2014), it isn’t difficult to imagine that mobile payments would become the next modern convenience to take the world by storm.
Risks and Challenges of Mobile Payments
Although the mobile payment sphere presents a slew of exciting promises of cost-cutting convenience, it also poses some risks. This article from inc.com states that small businesses in particular that accept mobile payments may not be taking enough preventative measures against fraud.
The article from Inc. states that, “According to the report by LexisNexis and Javelin Strategy & Research, small businesses that accept at least one type of mobile payment–including through mobile apps, mobile point-of-sale systems, or mobile browsers–protect their business with fewer fraud-prevention solutions than larger companies.”
The LexisNexis and Javelin Strategy & Research report found that smaller mobile merchants only use an average of 2 different types of fraud-prevention technology, while larger businesses use around 4 different types. The study also found that fraudulent mobile transactions can cost a business three times the value of the actual product stolen due to payment-processing fees, fraud investigation, and restocking stolen goods – definitely not something any business wants to deal with.
Therefore, it’s vital for small businesses to take preventative measures mobile payments to avoid being taken advantage of by fraudulent forces. The Inc.com article lists the following preventative techniques:
- Thoroughly authenticate transactions through mobile devices.
- Track fraudulent activities by each channel you offer. Currently, only 48 percent of mobile merchants reported that they track fraud by payment channel.
- Maintain open communications with financial institutions and other mobile merchants to better understand the evolving nature of fraud threats and solutions. Consortia such as the Merchant Risk Council provide forums for sharing expertise and assessing concerns.
Moral of the story – mobile payments are a good thing. They will make your life easier and will also be instrumental in boosting business for both small and large companies. But just like any new technological development, mobile payments also come with risks. And it’s important for us to be aware of those risks in order to reap the benefits of this next big thing.