Mobile Payment: An Introduction
The mobile payment consists of all modern electronic technologies that are present to the customers in addition to all the payment transaction carried out by the payment service provider. According to Kruger (2001), the mobile-based payment systems are meant for various business transactions that are performed through the cellular phones (Kruger, 2001). It is also called as a mobile payment system (MPS), as “any conventional or new payment system which enables financial transactions to be made securely from one organisation or individual to another over a mobile network” (Shon & Swatman, 1997).
In view of the large number of cellular phones all around in the contemporary world, it is sure that this modern technology has immense popularity base that the phones can also be used efficiently for business transaction purposes. Especially, the telecom industry is seeking various ways to improve its revenues in the turbulent economic times. It forcefully follows the options available to it that help the million of customers to buy daily goods and other services through their electronic devices (Dornan, 2001).
However, a precondition is vital for performing transactions through a cell phone is that it should be an efficient mobile payment system. Nevertheless, there exists no standardized, extensively adopted mobile payment system in the business world. Thus, it hinders the extensive utilization of MPS (Carlsson, 2001; Kruger, 2001). For instance, it was claimed “without standardized mobile payment solutions, the traditional problems of failure to complete transactions which are so prevalent in web-based EC would apply to mobile commerce as well” (Hampe & Swatman, 2001, p. 63). The meeting studied the rationales that might impact the implementation of mobile payment systems in the business world.
In fact, there are not many studies regarding the factors impacting the launching of MPS. Certainly, this can be due to the new technology in its infancy as well as the chaotic business environments affecting the early adoption of these systems in the world today.
Mobile Payment Service Implementation
Despite the fact the execution of various MPS differs significantly the fundamental composition is similar (Kruger, 2001). Firstly, the buyers and the sellers concur about the transactions and they notify each other via the MPS providers. Accordingly the service providers confirm the business transactions to the customers through their cell phones and then ask the customers for the authorization of the deals. When the deals are sanctioned, the providers conduct the transactions and give the necessary payment transfer instructions. From the time to time, these fund transfer instructions are cleared so that it results in updated accounts. However, in various payment systems a monthly invoice is dispatched to the buyers, like the other utility monthly bills.
The Conventional Payment Services
Generally, the more prevalent methods of payments in the current market are done through cash, checks as well as in addition to debit and credit cards. In fact, in many European countries, there exists a strong tendency using cash payment through cards. On the other hand, in the USA, the card payment is done through for any business transaction. The digitalization payment process was introduced to some extent with the rise of demand for e-commerce. Similarly, the e-payment modes are visible for utility bills, electronic-invoices, and in electronic-direct debit and credit transactions.
However, due to the phenomenal rise of electronic-commerce, there is a rising demand for MPS. Nevertheless, the current dilemma for the end users is that how the traditional mode of payment services could be adjusted with the new technology. A number of developments point out that cell phones are simply a new method for the traditional payment systems. Nevertheless, there exists a danger that the introduction of MPS endangers the traditional payment modes.
Consequently, a number of studies have discussed the disturbing prospects of MPS against the traditional payment system (Ondrus & Pigneur, 2005; Ondrus & Pigneur, 2006a). The findings showed that the use of traditional payment system through cards were preferred over MPS in the European market. Similarly, Chou et al. (2004) assessed different payment technology modes by applying scientific, monetary, and social aspects. Accordingly, the results were noted that payments through the telecommunication bill were not always welcomed. As well, other research points out that MPS were used only to complement the existing mode of payments (Mallat et al., 2006).
Other E-Payment Services
While e-commerce generated a significant need for electronic payment services, a number of contemporary organizations introduced payment services that were, in fact, based on the existing card- and account-based methods. Nevertheless, as a result of safety and confidentially issues faced by the clients, a number of companies for example PayPal, Paystone, etc, were successful in meeting the requirements of the businesses and other consumers. Consequently, the payment provides introduced a new kind of payment technology to complement the existing payment methods.
The Competition in the MPS Market
However, the uncertainty in the market was rampant if the espousal MPS will prevail. The number of financial companies, as well as mobile operators, was seeking to prevail over the issues related to e-commerce by starting new independent methods to that respond to the specific market requirements. One such issue was the collaboration between banks and internet providers, both of them wanted a greater market share as to improve their profits. Nevertheless, the present MPS would manage the payment process, and mobile operators would generate new ways in their mobile network infrastructure. However, such an arrangement could pose dangers for many organizations for not carefully supervising the solutions.
Nevertheless, there were few studies that discussed in length the issues pertaining to the espousal of MPS. A qualitative study conducted by Zmijewska and Lawrence (2005) analyzed the benefits and drawbacks of the prospective MPS. The authors delved upon the potential role played by each stakeholder in various collaborative models.
For example, Ondrus and Pigneur (2005; 2006c) analyzed the potential risk created by new MSP in the European mobile payment industry. Accordingly, the collaboration between the stakeholders was preferred choice over the competition. As well, Karnouskos (2004) proposed a study and categorization of MPS solutions. Moreover, he discussed various mobile payment modes and their effects as a result of collaboration.
Mobile Payment Systems: An Analysis
Many analysts have analyzed the critical factors impacting the success of adoption of MPS (Bohle, Krueger et al., 2000; Clemons, Croson et al., 1997; Turban, King et al. 2002; Shon & Swatman 1997; Jayawardhena & Foley, 1998; Turban & Brahm, 2000). As well, a research performed by Delphi (Shon & Swatman 1997) on usefulness norms for MPS and showed several characteristics all over different stakeholders of the system. Nevertheless, the security and reliability of the system was foremost in all groups.
In the late 20th Century, a monetary transaction system was launched by MasterCard (Clemons, Croson et al., 1997) that considered various features impacting the successful implementation of the new payment system. The authors argued the issues were not “simply whether benefits from the product will exceed the costs of its creation assuming that it is adopted, but rather issues of channel coordination, consumer acceptance, and merchant acceptance. The feasibility of the initial business case rests on gaining a critical mass of consumer and merchant acceptance” (p. 256).
Anyhow, critical mass is strongly concerned with the MPS. Poon & Chau (2001) analyzed the electronic-payment system Octopus and found that critical mass and standardization are significant conditions for adoption of novel payment system.
As well, Jayawardhena & Foley concluded there are few fundamental preconditions for all MPS (Jayawardhena & Foley, 1998). Accordingly, the levels to which MPS can fulfill these conditions establish its success criteria.
Another study concerning the strategic issues of e-payment systems was conducted by Bohle et al (2000). The authors identified four strategic issues concerning to “the requirements of various stakeholders who outline and limit the espousal of prospective fee systems. The requirements were (1), standardization & interoperability (2) Clients safety, confidentiality, privacy (3), and the inclusion of payments through online transactions.
As well, Turban et al. (2002) enumerated several critical aspects that establish if an MPS will realize extensive acceptance amongst the people (Turban, King et al., 2002).
Mobile Payment Services: SWOT Analysis
Strengths
- Mobile Payment Services offer the electronic capabilities to support various applications of the customers
- The high availability of MPS devices in the existing markets offers huge potential of deployment in various financial institutions
- Mobile Payment can be done simply through as small personal devices that are handy and portable
Weaknesses
- The price of MPS device is considerably costly for the users. The manufacturers are unable to lower the prices to a favorable level unless there are large orders, and thus few customers have placed for large orders
- The expenditure of upgrading MPS may be exorbitant for the customers the service is subsidized
- The customers are much apprehensive regarding the safety and security of MPS devices
- MPS devices are at great risk of being stolen
- The incorporation of added accessories to the MPS handsets shall place more costs to the service
Opportunities
- Mobile Payment Service can considerably develop various financial applications, and thus facilitates major income generating prospects for all the stakeholders, in addition to advantages like a reduction in cash management and card issuing expenses
- Mobile Payment Services are compatible with many business standards, so these can be deployed for other many services along with the traditional payment system
- Mobile Payment infrastructure is deployed along with the traditional card payment mode. This must help broad payment services that may complement each other payment mode.
Threats
- The trial service of MPS show significant customers’ demand for the service, however, the success of introducing commercially viable service remains doubtful
- The business case for multinational companies to adopt Mobile Payment is uncertain
- Mutually useful business models have yet to be created between multinational companies and major mobile manufacturers. There are certain critical concerns that require concrete solutions that included costs sharing and profits, as well as ownership
- A number of MPS device companies have yet to transport large amount of compatible handsets
Conclusions & Recommendations
This research paper investigated various factors that impact the successful execution of MPS. With the phenomenal rise of electronic-commerce, there is a rising need for MPS. Nevertheless, the current dilemma for the end users is that how the traditional mode of payment services could be adjusted with the new technology. A number of developments point out that cell phones are simply a new method for the traditional payment systems. Nevertheless, there exists a danger that the introduction of MPS endangers the traditional payment modes.
Whilst there are several interrelated factors that operate at the same time, others are now considered to be seen standing at the early stage of business lifecycle. The major issues concerning the implementation of MPS are the consumer approval, the cost vis-à-vis traditional payment methods, user-friendliness, and the perceived risks of forgery. Moreover, the buyers’ and sellers’ approval are strongly interdependent to each other for the acceptance of MPS. In addition, the advantages of MPS should be addressed in relation to traditional payment methods wherein the relative benefits are greatest for the consumers.
It is thus recommended to carry out more focused quantitative research, which would offer necessary insights about the factors for the approval particular payment systems.
References
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