Businesses and Mobile Pay: A Closer Look

Throughout these blogs we have addressed how mobile pay has affected businesses and banking. In today’s post we plan to show the importance of mobile pay for businesses, how they are integrating mobile payment into their functionality, and what it means for business competition moving forward.

Firstly, we should examine what businesses are benefitting from the adaption of mobile payment. A common consensus amongst experts is that any business that offers a service or sells a product should have a way to accept mobile payments¹. This seems simple and straightforward because it is. The U.S. alone has roughly 123 million smart phone users and leading business professionals agree that every business should be prepared to accommodate their customers in the most convenient method possible, which includes accepting mobile payment¹. Businesses cannot afford to be left behind in today’s market, making mobile payment a must have technology.

Now we can examine how businesses are integrating mobile payment into their service model. For mobile payments like PayPal or Bitcoin, businesses must simply create accounts or ‘wallets’ with these services to be able to accept the payment method². For PayPal, corporate accounts come with transaction fees, but for most businesses the fee is insignificant compared to the increased cash flow, especially if the business operates online². For other mobile payment methods we’ve discussed, such as Apple or Samsung Pay, businesses need two things: a terminal that can accept mobile payments (typically NFC readers) and registration with the mobile pay provider². Any modern sales terminal that can process tap card payments will have NFC functionality². To register with mobile pay providers businesses must often pay sign-up fees and transaction fees, however these are also often cancelled out by the business mobile payment can attract². A third, and more recent method of accepting mobile pay is a mobile point-of-sale technology (mPOS)¹. This technology allows anyone to plug the mPOS machine into their internet enabled smart phone and have the phone act as the terminal¹. The mPOS can accept credit or debit cards as well as registered mobile pay providers, giving businesses a massive mobility and convenience boost when looking to accept payment.

Finally, we can examine how mobile payment is changing the landscape of business competition. For traditional, established businesses, mobile payment simply presents a new technology to stay up to date with. If these businesses fail to join the mobile pay party they may find themselves less profitable. Although, by adopting mobile pay at this stage in it’s life cycle the competitive advantage is mitigated somewhat by the fact that all tech-savvy competitors are utilising it too. Mobile payment options present the greatest advantage to independents or entrepreneurs³. These small businesses or start-ups that don’t have the economies of scale available to large firms are now able to utilise mobile payment and mPOS technologies to compete on a larger scale³. Start-ups are now able to accept payment as soon as they sell a good or perform a service (no more invoicing or manual payment processing), they have access to the funds right away (as opposed to waiting for cheques to clear), and affordable mPOS options grant them these opportunities at very low costs³. The rise of mobile pay is a strong contributor to the rise in competitive equality amongst firms of all sizes.

Technological advances have always been key in a developing and interconnected business world. Mobile payment is a key example of how businesses can, and must, utilize technology to enhance their functionality and compete in the market. 

Footnotes

1 Lonoff Schiff, Jennifer. (Jan 29, 2013). How a Mobile Payment Service Can Grow Your Business. CIO Magazine. Retrieved From http://www.cio.com/article/2388694/e-commerce/how-a-mobile-payment-service-can-grow-your-business.html

2 Intuit. (2016). What Mobile Payments Mean for Your Small Business. Intuit Quickbooks. Retrieved From http://quickbooks.intuit.com/r/getting-paid/what-mobile-payments-mean-for-your-small-business/
3 Madden, Sam. (Nov 19, 2014). How Mobile Payment Apps are Energizing Businesses That Live on Cash Flow. Entrepreneur. Retrieved From https://www.entrepreneur.com/article/239604

Bitcoin – Currency of the Future?

PayPal, which we discussed previously, is not the only threat to traditional banks in the mobile pay and currency market. Bitcoin, launched in 2009, presents a whole new way for people to make exchanges and payments. It may not operate in the way traditional banks and currency does but it still is having a profound impact on payment and business. 

Bitcoin operates as a peer-to-peer computer network made up of the machines of users¹. The network of interconnected machines is used to monitor and record every transaction that occurs, as well as allow for the creation of new bitcoins (which is limited to around 21 million)¹. Users who allow their computers to be apart of the network which keeps bitcoin running are rewarded with the creation of new bitcoins, creating a whole new currency system with no governing authority that distributes money¹. Instead a computer algorithm does the work of distribution and management¹.

Payment using bitcoin is no where near as complex as the network and technology that supports the currency. Two users must simply have bitcoin wallets on their computer or phone and they can exchange value². You can use any other currency to purchase bitcoin, then you send a message to another user identifying the bitcoin you want to send as well as a private key for the transaction². The transaction is then processed and added to the ledger by the large array of computers doing the work and the transaction is complete¹. No transaction fees, total anonymity, and no lags in processing. The advantages bitcoin offers consumers are vast in an era of preferred safety, speed, and mobility.

Bitcoin, however, is not a perfect system. Since it is so unregulated it displays extreme volatility in value. This presents a clear problem for consumers or businesses which regularly perform transactions³. Also, the anonymity of bitcoin has made it a haven for black-market deals or drug dealers, as users who performed the transactions are nearly impossible to find and indentify⁴. Finally, while the system is relatively secure it is not impenetrable and has proven to be vulnerable to cyberattacks resulting in a loss of wealth³. 

Despite these flaws, bitcoin represents a new form of innovation that, much like PayPal, forces markets to further adapt to mobile pay. Businesses looking to attract customers must start accepting bitcoin and the risk that comes with its volatility to stay competitive, while banks must add new capabilities to compete with the convenience and mobility. No longer do clients need to worry about exchange rates (since bitcoin is universal), waiting for cheques to clear, or disclosing information to those they are paying. Payment takes seconds at the touch of a button and your ‘wallet’ is totally mobile wherever you go. While a survey conducted by ING International found that only 24% of Europeans agreed payment methods like bitcoin would be the standard in the future⁵, the services they offer cannot be overlooked in both the business and banking world. This can easily be viewed as another step towards the adoption of increasingly convenient and mobile forms of payment. 

Footnotes

1 Standgae, Tom. (2013, April 11). How does Bitcoin work? The Economist. Retrieved From http://www.economist.com/bitcoinexplained

2 Broughton, Philip. (2016, May 26). Bitcoin is just the beginning. The Wall Street Journal. Retrieved From https://www.wsj.com/articles/bitcoin-is-just-the-beginning-1464302194

3 Casey, Michael & Vigna, Paul. (2015, Jan 23). Bitcoin and the digital currency revolution. The Wall Street Journal. Retrieved From https://www.wsj.com/articles/the-revolutionary-power-of-digital-currency-1422035061

4 Harrigan, Martin & Reid, Fergal. (2012). An analysis of anonymity in the bitcoin system [Abstract]. Security and Privacy in Social Networks, 1, 197-223. 

5 ING International Survey. (2013). Financial Empowerment in the Digital Age. Retrieved From https://www.ing.com/Newsroom/All-news/NW/Cash-no-longer-king-Mobile-banking-still-rising.htm