Wireless payment system
Payments made through mobile and wireless devices.
Learning Objectives
- Define wireless/mobile payment systems and their categories.
- Explain NFC-based point-of-sale mobile payments.
- Describe social/mobile peer-to-peer (P2P) payment systems.
- Identify the major players and growth trends in mobile payments.
Explanation
Wireless payment systems let you pay using a smartphone — either by tapping it at a store (NFC) or by sending money to a friend through an app like Venmo.
The use of mobile devices as payment mechanisms is already well established in Europe and Asia and is now exploding in the United States, where the infrastructure to support mobile payment is finally being put in place. There are two broad categories: NFC-based point-of-sale payments (digital wallets like Apple Pay, Android Pay, Samsung Pay) and social/mobile peer-to-peer (P2P) payments.
Near field communication (NFC) is the primary enabling technology for mobile point-of-sale payment systems. NFC is a set of short-range wireless technologies used to share information among devices within about 2 inches (50 mm) of each other. Consumers swipe their NFC-equipped phone near a merchant's reader to pay for purchases. Apple Pay, Android Pay, and Samsung Pay are leading NFC wallets.
Social/mobile peer-to-peer (P2P) payments are another rapidly growing category. Services such as Venmo, Square Cash, Snapcash, the refocused Google Wallet, and Facebook Messenger Payment enable users to send another person money through a mobile application or website, funded by a bank debit card. There is no charge for this service. Venmo, owned by PayPal, is particularly popular, with its success in part due to its integration with Facebook and its social network newsfeed.
Mobile P2P is growing explosively: analysts forecast that mobile P2P will grow to $174 billion, worth 30% of total P2P payment volume, by 2020 — up from $5.6 billion, or just 1%, in 2014. Surveys reveal that about 20%–30% of smartphone users have downloaded mobile wallet apps, but that only about 20% of these adopters have made a payment in the last month using these apps.
Key Points & Important Terms
Key Points
- •Two categories: NFC point-of-sale wallets and social/mobile P2P.
- •NFC operates within ~2 inches (50 mm).
- •P2P services (Venmo, Square Cash, FB Messenger) are funded by bank debit cards and are free.
- •Venmo's popularity comes partly from Facebook integration and social newsfeed.
- •Mobile P2P forecast to grow to $174 billion by 2020 (30% of P2P volume).
- •20%–30% of smartphone users have wallet apps; only ~20% used them recently.
Important Terms
- Wireless payment system
- A payment system using smartphones and wireless devices to pay.
- NFC
- Near Field Communication — short-range wireless tech (~2 inches) for contactless payments.
- P2P payment
- Peer-to-peer payment sent between individuals via a mobile app, funded by a bank debit card.
- Venmo
- A popular social-mobile P2P payment app owned by PayPal, integrated with Facebook.
- Mobile wallet
- An app (e.g. Apple Pay) storing payment credentials for NFC point-of-sale payment.