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Most people have made a payment with their mobile phone but what are they paying for and what does it mean for retailers? Paul Skeldon investigates.

The launch of the Apple Watch has all technology watchers slavering about what it means for m-commerce and m-payments. The watch, they say, will be the thing that transforms Apple Pay from a niche payment product to a mainstream one. It won’t, and it doesn’t need to: mobile payments is already pretty well established in the consumers’ mind. Apple Pay will probably make it look nicer and work better, but right now m-payments is here and is being used – albeit somewhat covertly.

The issue with mobile payments is that there are so many different ways of doing it that it often becomes obscured by complexity. There is no one ‘right’ way to deploy mobile payments so there is no real ‘trend’ towards it happening.

However, it is happening in many sectors and, because it is so seamless and easy, you hardly notice that it is happening. In fact, research by payment tech provider Oxygen8 has revealed that more than 31 million UK mobile users – that’s 92% of them all – will make payments with their mobile device in 2015. A further 24% of users said their spend on mobile would increase with additional payment platforms available at the point of purchase, such as carrier billing.

A separate survey by Experian, the global information services company, reveals that a third of the UK population believes credit and debit card payments will no longer be the preferred method of payment in 2020, as paying with a smartphone will take over.

The march of mobile payments has begun and consumers clearly see it as the future. But where is it now; where are all these mobile payments taking place?


The place where mobile payments has been proving itself for several years now is the charity sector. Many charge to mobile companies that offer what is known as direct operator billing – where the money you spend on something appears on your phone bill or comes off your pre-pay credit – and it’s been a huge success. At the last count some £100m is donated in this way every year now in the UK.

Take a look at the most recent disaster in Nepal, the call to action on the widely broadcast adverts has been to text NEPAL to 70000 and you automatically donate £5. This has become a proven technique for delivering money via mobile for some years.

Companies, including OpenMarket Fonix and Oxygen8, which are behind these text tools targeted charities as the ideal proving ground for this sort of technology. It has been a consistent effort to get charities to use mobile and it has worked.

BBC Children in Need is a prime example. Its November 2014 campaign delivered £5m through text donations alone, delivered by two companies Fonix and Harvest Media.

Using the power of text to connect with consumers, donators were also engaged to deliver more Gift Aid than ever before. Edward Boddington, CEO of Harvest explains: “Since we started working with BBC Children in Need in 2011, the charity has always strived to innovate. Using mobile text short codes for charity telethons is a high growth area as it allows charities to keep 100% of whatever the donor texts, in this case £5 and £10 price points.”


The other key pioneer in using mobile payments effectively is the ticketing sector, especially around travel and entertainment. According to Juniper Research, the number of digital tickets purchased globally via mobile and desktop devices including smartphones, tablets and PCs will total 32 billion by 2019. More interestingly, it is already estimated that 16.2 billion will be purchased this year.

The research found that with digital ticketing services developing fast across the transport and events sector, mobile handsets will account for more than half of digital tickets purchased by 2019.

According to Juniper, in almost every market, metro and bus ticketing was being driven by mobile phone usage. The low price, high frequency and high volume nature of metro/bus ticketing was found to be particularly suited for mobile payments.

In addition, it was found that metro/bus ticketing is gaining traction through barcodes delivered via smartphone apps, and through SMS-based solutions, with the latter witnessing impressive user adoption in markets such as Sweden and Italy.

The research observed that ticketing apps will become key for wearable devices, such as smartwatches. “Smartwatches with NFC capability offer a convenient replacement for contactless debit-cards and smartphones. Integrating new devices and wearables should be a key strategic directive for all players across the ticketing value chain,” notes research author Nitin Bhas.

However, the research notes that a number of challenges, including scanning capabilities and battery life, need to be addressed for wider adoption.


Interestingly, the food and drink sector is becoming one of the early adopters of mobile payments and is one of the first sectors to start using it for something physical rather than digital. Asian-fusion restaurant chain wagamama, has partnered with MasterCard to bring restaurant customers a more convenient and quicker way to pay for their meals using the Qkr! app with MasterPass, which will, the restaurant says, allow customers to pay their bill as and when ready, cutting out the average bill paying waiting time of 13 minutes.

Richard Tallboy, Director of Business Development, wagamama, explains: “We know that the biggest area of feedback from restaurant customers is related to the speed and convenience of payment. The Qkr! with MasterPass payment app allows customers to control when they want to pay through a simple and secure download app. Whether they are having a quick bite at lunchtime and need to get back to work or are having dinner before a show, putting them in control of paying when they are ready makes for a more relaxing dining experience.

“We also know that customers come to wagamama with friends and family to enjoy dining in an informal environment. The app offers our customers the ability to dine together but pay separately via the app, simplifying the experience.”

Again the issue of it being about more than payments, as exemplified by charities and GiftAid has been put to the test in the food and drink sector in a trial at Twickenham rugby ground late last year, where fans attending the QBE International rugby game between England and New Zealand could pre-order food and beverages any time before or during a game using an app from PowaTag. Their food and drink could then be picked up from special express lines located at six bars throughout Twickenham Stadium and the West Fan Village, minimising overall queuing time.

Sophie Goldschmidt, Chief Commercial & Marketing Officer, RFU, explains: “We are committed to enhancing services on match day and by incorporating new technologies such as PowaTag we can offer fans a more enjoyable experience at the Stadium. The app enables us to minimise queuing and also deliver a range of offers such as loyalty rewards and special discounts. Our first venture into m-commerce proved to be a great success, and we are excited to bring the service to even more fans when they come to support the England Rugby team at the QBE Internationals and beyond.”

Aside from these sector-based trends in m-payment up take, there are a range of other areas where m-payments is also gaining ground on the quiet. Travel on a Virgin Train and you can pay for wifi access using text via a service called Payforit, which is run quietly and with virtually no publicity by the main UK network operators.

You can also pay for car parking in most places these days by text too, and for some using apps that incorporate pre-registered cards.

All these things are starting to put m-payments in the public mind and, almost by stealth, they are starting to happen. It can only be a matter of time before retailers start to offer mobile as a payment channel.


However, there are caveats: trust and micropayments.

While mobile and digital payments are on the rise, the majority of consumers in the US – 8 in 10 – still have concerns with adoption of this technology, according to Walker Sands’ 2015 Future of Retail Study.

According to the study, cash use continues to be on the decline, with only 11% of consumers having paid for something with cash in the past day and 59% of consumers carry less than $20 in their pocket. Unsurprisingly, it also reveals that consumers are waiting for a trusted source to handle m-payments. While only 4% have used Apple Pay, 18% say its introduction makes them more likely to make a purchase with their smartphone in the next year. The number rises to 36% when asking Apple users.

Consumers – especially the younger generations – are looking for the convenience of peer-to-peer payments, with half of consumers aged 18 to 25 saying that they are likely to exchange money with a friend or colleague via a mobile application such as Venmo or QuickPay, in at least one payment scenario, compared to only 19% of those aged 46 to 60.

Then there is the issue of micropayments. All the examples given above – charity donations, transport, wifi, food and drinks – are all small, low value purchases. Is anyone going to buy a £1,000 handbag using them? Well no, not as it currently stands. However, with convenience comes trust and as consumers learn to trust m-payments for micropayments and increase their use of it so it will come to be used for big purchases.

Look at what has happened with Barclays Pingit. Back in February 2014, an unnamed individual paid a £23,000 deposit on a home to an estate agent using the Pingit app on his mobile phone. It is an extreme example, but it shows that eventually it will come.

Of course, there are limits currently on how much you can spend using the various mobile payment tools out there. Carrier billing, for example is limited to £30 a day and a maximum of £300 per month. Don’t forget though that there are limits on cards too. These things will move and evolve as the market does.


So, mobile payments are being used, quite widely, in all manner of applications and retailers in these fields understand its importance. What does this mean for all the other retailers? Well, they need to start thinking about what their mobile payments strategy is going to be because they are sure going to need one in the next few years.

Many will be waiting for “the one” to come along to make their decision easier, but in reality they are going to have to look at several. Let’s face it, a given retailer doesn’t just take one kind of card payment, or only handle coins; they have to offer multiple payment options. The same will apply to mobile.

The trick is to look at those that are available now, assess the ROI risk on implementing a couple and trying them out. Apple Pay and/or Samsung Pay can be added as and when a critical mass is reached.

Another cautionary note is that perhaps mobile payments alone isn’t the key. As proven by charities and Gift Aid, the use of the payment process, especially where it involves SMS, is perhaps part of a bigger engagement strategy. The old model that you market to a potential customer and they come and buy is dead in the digital age: now you have to constantly and interestingly engage them. Payments is no longer the end point, but just another way to talk to them and get them to come again. That on its own should be driver enough to get retailers to invest in a mobile payment strategy.

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