Money, wealth, and the idea of possession has always been of prime importance to mankind even long before we became civilized.

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However, the role of money and payments increased dramatically after we started settling in one place which gave birth to the early civilizations.

The form of payments since then has seen some massive changes over the years.

In many ways, the form of payment reflects the current state of our civilization. The earliest payment method known to us is of bartering, which included simple exchange of goods or services. However, it was inaccurate, inefficient, and took a lot of time.

Our payment method saw transformations as we started living in more connected, settled, and organized manner.

That’s why we moved from barter system to the representative money (shells, gold, and silver) which soon evolved into the coins.

As time passed, we became better at finding improved and efficient payment alternatives. Shift from coins to paper money was its proof.

Paper money then later evolved into the fiat currency which is used in most parts of the world today.

Perhaps, the most significant shift was from the paper money to the electronic money. The very first credit cards were introduced in the 1950s.

Debit cards were then introduced in the 1980s, which exposed users to the benefits of instant payments and ended the dependence on checkbook and cash.

With the emergence of the internet, eCommerce came into the scene. Companies like Amazon, PayPal, and eBay which started in the 90s began to grow exponentially by leveraging the power of electronic money.

The advent of internet and smartphone gave birth to mobile payments through mobile finance solution, which can be considered as the cutting-edge mode of payment. But how did it start? What does it look like now? And what can we hope from the future?

All these questions will be answered in this blog in detail. So, first let’s have a look at its history.

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History of mobile payments

1997 was the year, when the mobile payment of services or goods was enabled for the first time in the world when Coca Cola in Helsinki came out with a beverage vending machine, where users could pay for the beverage with just an SMS message.

Around the same time, the oil company Mobil, also came out with an RFID device called Speedpass.

This device helped its users to pay for their fuel at the gas stations by simply slipping the device at or near the sensors placed on the pump.

These two services are considered as the pioneers of mobile payment. Both the services were based on the SMS and the payments were made by a mobile account that was linked to the user’s device.

Initially, the payments were limited to smaller amounts and that’s why they were often referred to as micropayments.

The mobile payment systems based on SMS soon evolved into the world’s first phone-based banking service launched by the Merita bank of Finland in 1997.

As time passed, the mobile payment systems kept on getting better. By 1999, we started buying movie tickets from our mobile devices.

In subsequent years, we also started ordering pizza and arranging travels from our phone.

In 2007, Vodafone launched one of the largest mobile payment systems in the world. It was based on USSD/SMS technology and offered various kinds of macro and micro payments.

Vodafone launched this service in Tanzania and Kenya with the cooperation of the local telecom operators.

2011 was the year which saw some major players like Apple and Google entering the field of mobile payment.

Google became the first major company to come up with its digital mobile wallet solution.

The wallet was based on the NFC technology and allowed the customers to make payments, redeem coupons, and earn loyalty points.

However, Google wallet was used as only one phone model and was accepted by a limited number of merchants. Even after all these limitations, it turned out to be popular among the users.

Apple followed Google’s footsteps to come up with their app called Passbook in 2012. Passbook targeted coupons and boarding passes instead of mobile payments.

Although, two years later Apple launched its pay service in US called Apple Pay at the launch of iPhone 6. Later it was available in UK and China.

Let’s have a look at all the important events in one glance.

Mobile pay timeline

  • 1997 – Coca-Cola introduces vending machines with SMS payments. Exxon Mobile introduces Speedpass, which used RFID technology for making payments.
  • 1998 – PayPal is founded.
  • 1999 – Movie tickets purchasing through some mobile phones.
  • 2001 – Domino’s Pizza begins taking orders through cell phones.
  • 2004 – Donations to nonprofit organizations through SMS.
  • 2009 – Square starts its services. The mobile payment market crosses $69 billion in sales.
  • 2011 – Google introduces its wallet service.
  • 2014 – Apple introduces Apple Pay.
  • 2015 – Samsung Pay and Android Pay and become available.

The present day mobile payment trends

We just saw the history or the past of the mobile payment. Now, let’s see how does the present of mobile payment looks like.

1. Contactless payments

As the name suggests, the contactless payments don’t involve any contact between the device and the reader. It lets the customers to tap a credit card or wave their phones over the reader to make payments.

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Contactless payment is faster in comparison to the inserting or swiping a card. Companies like Google, Samsung, and Apple have GooglePay, SamsungPay, and ApplePay respectively which uses the contactless payments.

There’s a huge possibility of them growing furthermore due to many other factors like contactless card availability, customer demand, and business adoption. Let’s discuss them one by one.

Contactless card availability

The penetration of contactless cards in the US is the lowest in the world. According to a study by ATKearney, the contactless cards penetration in US is only 3.5% as compared to that of UK and South Korea which has the penetration of 60% and 96% respectively.

However, this scenario will soon change as US card issuers and Visa has hinted towards an increase in the availability of contactless cards in the future.

Visa has estimated that there will be 300 million contactless cards issued in the US by the year 2020.

Business adoption

Conditions of business and infrastructure largely influences the payment choices of the people.

UK serves the best example, as there was a mass migration towards contactless payments when the London’s public transit system had decided to adopt it as their payment method.

In the US, we might see something similar happening, as the NYC’s subway system has decided to accept contactless debit and credit cards. This might trigger the contactless payment revolution similar to that of the UK.

Consumer demand

There’s a high demand of contactless payments among the users since it’s simple, secure, and swift.

Consumers prefer contactless mode of payment as it reduces their waiting time at checkout.

Contactless transactions are faster than other modes of payment which enables efficient utilization of consumer’s time.

Contactless payment mode is also a more secure than the other modes quite contrary to what many people believe.

When a contactless payment is made, the account data is passed from the mobile or card to the reader once it’s tokenized into a one-time code.

The consumer’s card details are never revealed in the contactless payment, making it more secure than the typical card payments.

2. Smart speaker payments

Smart speakers and home assistants have witnessed a tremendous growth over the years. Many major names like Amazon, Google, and Apple came forward with their smart speakers.

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Amazon was first to release its smart speaker in 2014. Whereas, Google came with Google Home in 2016 followed by Apple in 2017.

Smart speakers receive voice commands from the users. The users can give different kinds of commands like booking Uber, getting information about the nearby restaurant, or getting weather updates.

Amazon has surely taken a lead, when it comes to payments made via smart speakers.

Many companies have also shown a keen interest in incorporating their payments via smart speakers. For example, Domino’s has now allowed all the users to place orders through Amazon Echo.

Earlier, Amazon had also decided to allow its smart speakers to be used by several vendors for payments.

Talking about the future of smart speakers in the US, it seems quite promising as BI predicts that there will be as much as 78 million users by the end of the year 2022.

3. Omnichannel commerce payment infrastructure

Shopping habits of consumers have evolved quickly after the penetration of the smartphone. In-app payments and one-click commerce have gained immense popularity over the years.

Nowadays, many merchants have learnt to manage multiple channels and retail formats.

By applying an omnichannel payment strategy, the merchants can boost their in-store sales efficiency, post-sales services, customer satisfaction, and reduces the cases of frauds.

The future of mobile payments

We saw the current trends of mobile payments. Now, let’s have a look at what the future has in store for mobile payments.

Advanced security with machine learning

Security is the driving force for the advancement of the payment technologies. If the security is not up to the mark then it causes difficulties in evolving the payment technologies.

Security is a vital component in payments as a massive amount of payment data pours into the bank.

Scanning frauds from such big lot is quite a task and only specific machines and software can fulfil it. That’s the reason why many banks are looking for machine learning to accomplish this task.

Machine learning is a part of the AI umbrella. Banks constantly feed ML with new transactions.

This constant feed shows ML the difference between the normal transaction and the fraudulent one.

ML software studies these cases and learns to detect the fraudulent transactions in real-time. ML keeps on getting better with more and more transactions and fraud detection.

You might have received text messages on behalf of your credit card company that asks you if the transaction is fraudulent.

All these messages are sent out by the ML software to alert you prior to any big fraud.

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Criminals are finding new ways to con people and increasing cyber crimes are a proof of it.

As the criminals up their game, banks also make their security tighter than ever with machine learning technology.

Mobile point of sale

People’s payment preference is not the only thing which is going mobile. With Mobile-point-of-sale (mPOS) technology, the credit card payment processing is going mobile too.

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Mobile point of sale or mPOS units are the wireless devices that are made to mimic the sale terminals and traditional cash registers.

mPOS units offers simple, wire-free, space-saving, and convenient way for merchants to accept payments.

mPOS units sets merchants free to go anywhere to accept customer’s payments. Earlier, this wasn’t possible due to merchant’s legacy in-store payments systems.

With mPOS, there’s no need for a centralized checkout location. The customers don’t need to take their packages to the cashier, instead they can check out it from any of the employee present there.

The number of mPOS devices in 2014 were only 3.2 million, which are estimated by Business Insider to go up to 27.7 million devices by the year 2021.

Biometrics authentication

Biometric is nothing but measurement of physical characteristics like fingerprints, retina, iris, voice, face, vein infrared thermogram, eye, or combination of all these characteristics.

The biometric authentication has been quickly adopted by several banking institutions as the latest form of digital security.

FinTech have already estimated that the PIN numbers are going to get obsolete.

Moreover, with billions of customers migrating towards the digital platforms, now it’s the demand of the hour for the financial institutes to provide a safe authentication process in mobile payments.

And biometric authentication has proved to be a safer alternative to the PIN or any other process.

Biometric authentication is receiving good support from the people, as 56% of people are saying that they trust the biometric methods over PIN to authenticate their accounts.

Social commerce

Today’s tech-savvy generation spends most of their free time scrolling on various social media platforms such as Instagram, Facebook, Twitter, Snapchat, and many more.

Merchants and retailers have sensed this trend are looking to reach out to them via social media and offer them their products.

They also ensure that instead of redirecting the user to fill the form out they would rather utilize the moment and enable their users to checkout through the social media platform.

This method also makes payment streamlined and faster. Moreover, the chatbots speed up the autofill helping and checkouts.

Conclusion

In this blog, we saw how the mode of payments evolved with time. We saw its journey starting from mobile (barter) to mobile payments.

After that we dived deep into the history of mobile payments and mentioned all the important events that shaped the future of mobile payments.

After past, we looked into the current trends of mobile payments that are dominating in all industry sectors worldwide.

At last, we saw the future trends of mobile payments. Trends that will further revolutionize the mobile payments forever.

The journey of mobile payments is sure to be filled with drastic changes. And in coming years we might see the mobile payments completely taking a new form. But what will be it, only time will tell.

Till then keep reading this space for more such insightful content.

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