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Is a Universal Payment Method Really What We Need?

Mobile Commerce Insider Featured Article

December 02, 2014

Is a Universal Payment Method Really What We Need?


Mobile payments have just not caught on, despite the payments industry’s many attempts to make this option desirable. Apple Pay has brought the subject to the forefront of the public consciousness again. Is this at last the solution that will make credit cards obsolete?

As the various stakeholders in the payments industry debate, what they focus on is how to monetize mobile payments. What is not being debated is why we are developing these alternative payment methods and where they will apply. Are mobile payments more convenient, lower-cost or more secure than the existing ways to pay – and do the same benefits apply everywhere?

The 800-pound gorilla of these conversations is that credit cards and cash still work just fine.
In some cases cash is still king, and card payments are on the whole quick and convenient for the end user. Although fraud has risen in the U.S. in recent years, there is general agreement that EMV (the Europay, Mastercard, Visa global standard) adoption has significantly reduced fraud elsewhere, at least in physical stores.

Universal acceptance is a huge convenience factor for credit cards in particular, one of the key advantages that we often take for granted. You can use your credit card for payment almost anywhere in the world, whether online, at POS, or for withdrawing cash from an ATM. Travelers can pack a single card and be pretty sure it will work in almost all situations. Will the day ever come when we pack just the phone and leave the cards at home?

What’s certain, with the advent of peer-to-peer money transfers, prepaid, bill to phone and Bitcoin, is that the diversity of financial transactions is likely to increase – not decrease. Is it realistic, then, to expect one payment type to fit all scenarios? Perhaps we have to accept that in the future, we will use different payments methods for different purposes, rather than striving to develop one payment mechanism for everything.

So, perhaps we should be discussing which payment methods best fit different transaction environments, then, rather than debating if and how mobile payments might replace plastic cards. For the coffee shop and pharmacy, mobile payments might be a no-brainer, but what about the latest flat-screen TV, a meal in Shanghai, a river boat cruise on the Nile or pizza delivery? Then there’s online, in-app, shared device, private device, and even the Internet of Things where your fridge buys milk automatically! The list is endless, but the question is: where’s the sweet spot between having a wide range of payment options for different scenarios while minimizing consumer confusion and fragmentation? Mobile is part of the answer, but it’s not the only piece to the puzzle. The question is: how many pieces does the puzzle have?

The common thread across all the transaction types that currently exist, along with those yet to be invented, is that they must be secure. Every time a new payment method arises, so do sophisticated ways of stealing that payment. The larger the number of payment options, the wider the threat landscape. Lack of consumer confidence is the quickest way to kill a new payment method, so their creators need to take care. Throughout the history of online payments, the most effective means of securing payments has been robust encryption backed by hardware security modules (HSMs). HSMs exemplify the standards for key management, compliance and data protection and form a bedrock of trust for consumers looking for a safe way to pay.

Edited by Maurice Nagle

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