What does it mean to focus on mobile? Since mobile payments drive development activity all the way across an organization, it’s important to begin by reflecting on exactly how an organization views this channel, as everything else is built on this perception.
Aaron McPherson, VP, Research Operations, Mercator Advisory Group. says that despite rapid and dramatic evolution in the mobile playing field, it’s still helpful to think about mobile payments in terms of proximity and remote, even though the overlap between these different technologies is growing.
McPherson defines “proximity payments” as those that involve face-to-face interaction using a mobile device as the mediating agent. These include Near Field Communication (NFC) and contactless payments technologies such as Apple Pay, Samsung Pay, and Android Pay. They also include Quick Response (QR) codes on merchant apps, platforms such as LevelUp and Chase Pay, and card readers that plug into a smartphone, such as those created by Square and PayPal.
Another type of payment that falls under the proximity banner is network-mediated payments, by which two participating mobile devices communicate not with each other but with a server in the cloud. This method, McPherson says, is most common outside of the United States in countries where banking and wired phone infrastructures are not fully developed and mobile operators have taken the lead to allow for person-to-person, or peer-to-peer, (P2P) payments and commercial payments.
In the United States, Gulf Pay and CVS Pay are examples of this technology. McPherson believes there are many more possibilities for this model going forward because it enables richer and more complicated transactions than other models do. However, because the U.S. has fully developed banking and wired phone infrastructures, this model may take longer to catch on here than in markets where alternatives are needed, where innovation will likely continue to be more rapid as a result.
McPherson defines “remote payments” as the converse of proximity payments, a catchall for everything that is not proximity. Although there may be face-to-face components even in remote payments interactions, he notes, the physical proximity of the payer and payee are not the characteristics defining how these transactions are carried out.
Examples of remote payment transactions are:
- In-app purchases, including games that have their own in-universe alternative currencies that can be used to level up
- Digital products such as music, books, movies, and games for use on mobile devices
- Merchant storefront apps, which are a mobile version of the merchant’s website including features such as a catalog, shopping cart, or mobile order ahead (think quick-service restaurants and retailers like BestBuy)
- Browser-based purchases, including “buy” buttons such as PayPal, Mastercard, and Visa pop-up buttons
It is with those buttons, McPherson says, that the differences between these methods lessen and overlap begins. Mobile, desktop, and laptop browsers are converging in their capabilities. In many cases today, the only real difference is screen size, and it’s not always easy for a merchant to tell where a transaction is coming from or whether it counts as “mobile.” Even the definition of “mobile” has been thrown into uncertainty as hybrid machines or devices blur the lines between laptops and tablets.
According to McPherson, this is why we should restrict the definition of “mobile payments” to technologies that facilitate payments on a mobile device, including NFC chips and fingerprint readers – even though these technologies also have other applications.
Once an organization has wrapped its head around what is meant by “mobile payments,” it can truly move forward to utilize both proximity and remote mobile payments to their maximum potential.