Dear purse, rest in peace. Your smartphone – Mobile Payment

Imagine a normal day in the year 2025: Unlocking your car, ordering and paying for your coffee, giving tips—all done with the help of your smartphone. This scenario sounds a bit like ‘brave new world’. But is it realistic?


Dear purse, rest in peace. Your smartphone

Imagine a normal day in the year 2025: You are leaving your house to go to work as usual in the morning. After you have locked the door with your mobile phone, you also use it to unlock your car door and start the engine. On the way to work, you stop at the bakery to pick up your breakfast. Of course, you have already ordered and paid for it via your mobile phone before. During the lunch break, you walk through the city to pick up your ordered coffee at the coffee shop, when you get a message with a coupon of the supermarket you happen to be passing by. So, you decide to stop there for shopping, for which you also pay with your mobile phone. On your way back to work, you walk past a street musician. You send him a small tip for his beautiful performance via your mobile phone.


What is the situation today? 

This scenario sounds a bit like ‘brave new world’. But is it realistic? In 2013, 20% of the world’s people used the mobile payment services as shown by ‘mobile web watch’, a survey done by the consulting agency Accenture. However, the number for Germany is much less—only 10 % of the people paying via mobile devices. What could be the reason for their reluctance?

One, Germans are famous for their traditional attitude, making them somewhat skeptical about technical innovations and retain their love to pay in cash. While people in other countries use their credit cards even to pay for coffee, you have a lot of people in Germany who still do not own a credit card.

Two, several privacy scandals, epitomized by the NSA affair, have made people wary of entering personal information in the Internet, especially sensitive data like their banking accounts.


3 steps for spreading mobile payment

Except meeting some essential needs, the popularity of mobile payments is still missing in Germany. First, there is no consistent technology for the payment process via mobile devices. Some companies use QR-Codes, some near field communication (NFC), a contactless method based on RFID, and the newest trend is the installation of the beacon-Bluetooth-technology.

There must be a critical mass of retailers offering this option to make customers use the new payment method. At present, while some big chains like Rewe and Edeka are trying out mobile payment, they do not yet have this option in stores, and use different systems. So, a customer has to install multiple payment applications on his smartphone if he wants to pay via mobile in different retail stores. Obviously, cash is the more convenient option right now.

A collective payment application launched by the biggest retail companies in Germany could boost the German mobile payment market. This application needs to be convenient and secure, and should offer some additional value to the customer, as sound reason to change his / her preferred payment method. Another alternative is the market entry of one of the global online players such as Google, Amazon or Apple. PayPal, the leading payment provider for e-commerce, has already launched an application for mobile payment.

Starbucks, a mobile payment pioneer, demonstrates the system’s significance. In the US, the coffee shop company earned one billion US dollars as revenue via its mobile payment application in 2013. In this app, the user can preorder his coffee while queueing, so the drink is already prepared by the time he reaches the till. Coupons or promotional offers can also be sent via the app for the benefit of loyal customers. Advantages for the company are the shortened queues, a more efficient payment process, and an interesting insight into the customers’ needs and drinking habits.

All in all, the mobile payment market has got an enormous growth potential, especially with the increasing spread of mobile devices.

Near future?

It is still a long way off, but if you think about the rapid development in other spheres of our society (communication, shopping) the brave new payment world seems to be near as long as the process is convenient and has an additional value for the user.

But you should remember that a long data track accompanies the new payment method. Every purchase is stored, analyzed, and condensed into user profiles. With every purchase at a participating shop, there will be new details added to the puzzle of your customer profile.

For example, if you buy jars of baby food twice in a row, you will get promotions on child nutrition. This is not far from the transparent customer we always try to avoid. This transparency can be dangerous. Imagine, you have just bought a tool that is associated with a crime, and you are tracked down and visited by the authorities immediately! This is especially worrying in times when mass surveillance by the NSA is on everyone’s lips.