August 27, 2013 at 14:26About NFC, SMS Payments and the Future
You must admit that a mobile phone is a thing that is always at hand, something we are used to and without which we can’t imagine our life. Referring to studies conducted by Mashable technoblog employees, more than 75% of the population have access to a mobile phone. Its usefulness in everyday life is so obvious that using it as a wallet is just another bonus to its almost unlimited possibilities.
Consequently, the development of the mobile payments industry is no longer something surprising and unusual, but quite logical. Using a mobile phone, you can make a purchase of real goods in the online store, as well as content on the site, as well as pay for household and everyday services. He may soon completely replace cash and credit cards. You can talk about the benefits of mobile payments for a long time, but the main plus remains simplicity in making payments.
Number of users of mobile payments
There are several payment methods that do not require the use of cash: Premium SMS (PSMS), electronic payment systems such as WebMoney and PayPal, and NFC technology ( Near Field Communication) We will examine in more detail Premium SMS and NFC payments, which are the most convenient types of mobile payments for use.
Paying via PSMS is an easy and fast way to pay for the desired service without leaving your home and using only your mobile phone. In practice, it has been proven that PSMS is a success with both content providers and those wishing to purchase this content. Well, this is not surprising: saving time, as well as the convenience and simplicity of this method of payment are obvious. This once again confirms that the audience of users who can pay for services via PSMS is rather wide. And despite the fact that some experts in the mobile services market are predicting a gradual disappearance of SMS payments, we are of a different opinion. According to statistics, the market for SMS payments grew by 44% in 2012. The growth trend is justified by the fact that SMS payments have a number of advantages relative to other payment methods,
Of course, not everything is so rosy. Speaking about the shortcomings of SMS payments, it is worth mentioning the high commission of mobile operators, which is added to the real cost of a service or product. That is, the buyer pays not only for the goods themselves, but also pays for the services of a mobile operator.
Let's take a closer look at the NFC technology, which has just begun to develop, but does not cease to rapidly acquire a clearer outline, and there is every chance that it will open up great prospects in the future. Moreover, more and more often in analytics we come across the assumption that it is NFC that will supplant payments via SMS as such.
NFC is a technology for exchanging data between devices that are approximately 10 centimeters apart. One of the ideas of this technology is to simplify the buying process and save potential buyers from many bank cards, or rather make them virtual, which eliminates the need to carry them everywhere with you. After “linking” a bank card to a smartphone with an NFC chip, you only need to touch the phone with an NFC reader to pay for the purchase.
As with SMS payments, a mobile phone with NFC module support also acts as a payment tool. The NFC chip can be integrated into a smartphone, a SIM card or a memory card. NFC support in mobile phones makes them truly functional. If this technology gains momentum and becomes available in most countries, including Russia, their owners will be able to use it while making purchases, paying at restaurants, cafes, gas stations, and parking lots. Mobile phones with an NFC chip can replace a plastic payment card, thanks to a very convenient user interface, high speed of payments and versatility.
But at the same time, an obvious lack of NFC technology remains the underdevelopment of the infrastructure, or rather, its absence. In order to further develop the NFC market, it is necessary to provide at least a network of payment terminals that support NFC technology, since they are the basis for the formation of infrastructure. An important aspect is also the interest in developing the technology of mobile operators and banks as key participants in the process.
Considering the advantages and disadvantages of PSMS and NFC, there are several aspects to compare:
1. Potential users.
We can definitely say that potential users of both PSMS and NFC are the owners of mobile phones. Further distribution of the sphere of influence depends only on what the user will pay. The owner of a smartphone with an NFC module can pay for travel in public transport, as well as a purchase in a store or an account in a cafe. At the same time, users of sites with paid services will be able to pay for the necessary service, just using SMS payments, and in these cases, NFC is not relevant. Moreover, the number of social networks, dating sites, online games is not decreasing, but growing, and with it the number of Premium messages sent by users to pay for services on these sites is growing.
In addition, no matter how rapidly NFC technology develops, its audience is already initially limited. This is because the NFC-enabled mobile phone is tied to a bank card, which not everyone has. So, a minor user will not be able to use NFC to pay. And such users have the lion's share of the market, as long as the gaming industry continues to develop. And this once again proves that SMS payments are a necessary tool for that part of the audience, which for one reason or another cannot use NFC payments.
2. Scope of application.
NFC is not in vain called the technology of the future, because the wide range of its application is obvious: the technology can be applied in almost all areas, including medicine, education, sports, business and the service sector.
In the future, the happy owner of a smartphone with an NFC module will not have to carry a wallet with him: any service, whether it’s buying a hamburger in a fast food restaurant or paying for parking, can be paid using your phone. With a good deal (infrastructure development for NFC), there is a chance that cash will even go by the wayside. The process of payment using the NFC-module is much faster than payment in cash, and there is no need to carry paper and metal money.
With the development of the mobile industry, and most importantly the development area for mobile software, the number of sites that can be accessed from a mobile phone and the number of users who do not ignore this opportunity has increased. Accordingly, the amount of money they spend on these sites has grown. Traveling the site from a mobile, the user pays for various services with his help, just by sending an SMS to a short number. Thus, he saves time and receives service using only a mobile phone and access to the Network. Therefore, the online services that the Internet is filled with undoubtedly need a form of payment such as PSMS. This is both dating sites and social networks, file sharing, torrent trackers, paid access forums, sites with content for a mobile phone, online games and other services. This payment method allows you to purchase virtual goods that do not have physical value in online games with their virtual worlds and in social networks. On various sites, users buy virtual currency, pay for registration, VIP statuses, participate in polls, give gifts to friends.
3. Security.
Vulnerability of NFC technology as a virtual wallet, according to experts, exists. If the phone to which the bank card is attached is lost or is simply stolen, the “new owner” will have direct access to your money. While you will call the bank in order to block your card, someone can already manage your finances. Very often, Russian banks prescribe in the card issue agreements a clause stating that they do not cover and are not liable for all losses that you incur until notification of the theft.
PSMS, like any other payment method, occasionally encounters fraudulent activity. Unreliable sites are often trusted by naive users. The only effective way to deal with fraudsters in this area is to inform Internet users about all possible fraudulent tricks and tricks. If users are notified in a timely manner, this will protect them from visiting such sites, or at least help to be more vigilant.
Be that as it may, it is unprofitable for such mobile operators to work with such sites, since they lose the trust of subscribers, and they leave to competitors, or billing companies, because if they ignore user complaints, they also lose trust and reputation, and accordingly - and customers along with earnings. Tight regulation by operators and careful verification of each project before it is connected on our side minimized the number of incidents related to unauthorized withdrawals from mobile subscribers' accounts.
However, not only Internet users are victims of scams. Cellular operators and billing companies also face the security problem of SMS payments. In this case, we are talking about fraud. Fraud is a fraudulent activity that is carried out using a mobile phone. Simply put, fraud SMS is a paid message sent from a number that has no funds on its account. Until recently, fraud was one of the main security issues of SMS billing. Now billing companies have made every effort to ensure that the fight against fraud is effective. Antifraud restrictions apply and the amount of fraud is noticeably reduced, which is good news. Mobile operators are constantly updating platforms, improving security tools, thereby reducing fraud traffic,
4. User countries.
If it is sensible to look at which countries are really ready to accept NFC technology, it becomes clear that few are ready for this. In order to introduce technology and enable it to function, a pre-formed base is needed. It will not be enough just to announce that NFC technology has already appeared in this country, because it should first of all be available to potential users. In developed countries, the development of NFC did not stop at the embryo stage, but went further: the consumer segment began to develop gradually, new business models appeared, it became possible to pay for goods and services using NFC.
In addition, the direct connection of bank cards with NFC technology implies the development of a credit card payment system and the presence of these cards in more than half of the population, and this is not characteristic of all countries. In other words, potential users of this modern technology are residents of countries in which almost everyone has credit cards.
The most active countries in using NFC are: Japan, Korea, Germany, France, Australia and the USA. In Japan, interest in contactless payments has appeared for a long time. As a payment method, the Japanese are actively using NFC at gas stations, railway stations, cafes, grocery stores, and in the near future, the payment system will be available even in a taxi. South Korea is not far behind Japan, and very soon its residents will be able to pay for travel and shopping using a phone with an NFC chip. France supported the theme of technology development with the opening of the world's first NFC supermarket. For the US, NFC is a well-grounded transition to the next level: Americans don’t really like cash, so such a simple and cashless payment method has already won the sympathy of American users. In addition, the technology is supported by leading US carriers Verizon Wireless, AT&T Mobility and T-Mobile USA and mobile phone manufacturers. Referring to ABI Research, in the US by 2017, the turnover of NFC payments will amount to 191 billion dollars.
Today, the use of contactless technology in Russia is also gaining momentum. So, the Big Three is trying to keep up with each other and is already introducing the technology with all its might into all kinds of areas of activity: you can find special NFC-readers for paying for goods and services in Megafon salons; Using NFC technology, MTS allows you to pay for fuel at gas stations; Beeline - for travel in the subway. However, there are two main factors that directly impede the introduction of NFC technology into the masses. Firstly, this is a lack of awareness among potential users about the existence and capabilities of NFC. Secondly, as already mentioned, there is as yet no infrastructure for the establishment of which both financing and time are needed.
According to analysts, progress in the development of NFC will not be in all countries. The highest levels of technology penetration will occur in North America and Europe.
Summing up, we can say that contactless payment technology has something to fight for in terms of attracting potential users. If SMS payments have already managed to prove themselves and increase user loyalty, then NFC needs more than one year to strengthen its position in the payment market. NFC technology is universal, in addition, it opens up new opportunities in the field of mobile payments, but at this stage not all countries are ready to meet with it. Nevertheless, there is a huge possibility that the technology will pick up large momentum. Thanks to time savings and an easier payment process, NFC has already managed to attract the attention of many leading IT companies that are in a hurry to add new devices with the latest technology.
According to some experts of the mobile market, SMS payments are yesterday, but this opinion is erroneous. Today, the sphere of SMS payments is actively developing and at its core are all the same good old SMS messages. For example, there was a direct carrier billing, which increased the income from the sale of media content, because those users who did not want or could not use a bank card as a payment tool began to buy it. In turn, subscriptions have become popular on sites that allow users to pay for a certain period of using the service. In addition, the development of SMS payments is not only due to Internet users, but also due to new commercial solutions. With their appearance, the range of goods and services that can be paid via SMS message, including even payment for parking, is expanding.
The growth of the market of SMS payments in the world
Forecast of the development of the market of mobile payments in the world
Definitely, the markets for the use of NFC technology and PSMS are different. Summing up, we can say that the development of NFC does not threaten an early death for SMS payments. Each of these payment methods has its own audience and the sphere in which it is most developed and appropriate. Based on this, it can be concluded that the wind of changes that came with the innovative NFC technology will not move SMS payments from a confident position, but will complement the market. PSMS and NFC can exist in parallel and independently from each other, developing in different directions, which is uniquely only for the benefit of consumers who can choose the most suitable payment method for themselves.
Consequently, the development of the mobile payments industry is no longer something surprising and unusual, but quite logical. Using a mobile phone, you can make a purchase of real goods in the online store, as well as content on the site, as well as pay for household and everyday services. He may soon completely replace cash and credit cards. You can talk about the benefits of mobile payments for a long time, but the main plus remains simplicity in making payments.
Number of users of mobile payments
There are several payment methods that do not require the use of cash: Premium SMS (PSMS), electronic payment systems such as WebMoney and PayPal, and NFC technology ( Near Field Communication) We will examine in more detail Premium SMS and NFC payments, which are the most convenient types of mobile payments for use.
Paying via PSMS is an easy and fast way to pay for the desired service without leaving your home and using only your mobile phone. In practice, it has been proven that PSMS is a success with both content providers and those wishing to purchase this content. Well, this is not surprising: saving time, as well as the convenience and simplicity of this method of payment are obvious. This once again confirms that the audience of users who can pay for services via PSMS is rather wide. And despite the fact that some experts in the mobile services market are predicting a gradual disappearance of SMS payments, we are of a different opinion. According to statistics, the market for SMS payments grew by 44% in 2012. The growth trend is justified by the fact that SMS payments have a number of advantages relative to other payment methods,
Of course, not everything is so rosy. Speaking about the shortcomings of SMS payments, it is worth mentioning the high commission of mobile operators, which is added to the real cost of a service or product. That is, the buyer pays not only for the goods themselves, but also pays for the services of a mobile operator.
Let's take a closer look at the NFC technology, which has just begun to develop, but does not cease to rapidly acquire a clearer outline, and there is every chance that it will open up great prospects in the future. Moreover, more and more often in analytics we come across the assumption that it is NFC that will supplant payments via SMS as such.
NFC is a technology for exchanging data between devices that are approximately 10 centimeters apart. One of the ideas of this technology is to simplify the buying process and save potential buyers from many bank cards, or rather make them virtual, which eliminates the need to carry them everywhere with you. After “linking” a bank card to a smartphone with an NFC chip, you only need to touch the phone with an NFC reader to pay for the purchase.
As with SMS payments, a mobile phone with NFC module support also acts as a payment tool. The NFC chip can be integrated into a smartphone, a SIM card or a memory card. NFC support in mobile phones makes them truly functional. If this technology gains momentum and becomes available in most countries, including Russia, their owners will be able to use it while making purchases, paying at restaurants, cafes, gas stations, and parking lots. Mobile phones with an NFC chip can replace a plastic payment card, thanks to a very convenient user interface, high speed of payments and versatility.
But at the same time, an obvious lack of NFC technology remains the underdevelopment of the infrastructure, or rather, its absence. In order to further develop the NFC market, it is necessary to provide at least a network of payment terminals that support NFC technology, since they are the basis for the formation of infrastructure. An important aspect is also the interest in developing the technology of mobile operators and banks as key participants in the process.
Considering the advantages and disadvantages of PSMS and NFC, there are several aspects to compare:
1. Potential users.
We can definitely say that potential users of both PSMS and NFC are the owners of mobile phones. Further distribution of the sphere of influence depends only on what the user will pay. The owner of a smartphone with an NFC module can pay for travel in public transport, as well as a purchase in a store or an account in a cafe. At the same time, users of sites with paid services will be able to pay for the necessary service, just using SMS payments, and in these cases, NFC is not relevant. Moreover, the number of social networks, dating sites, online games is not decreasing, but growing, and with it the number of Premium messages sent by users to pay for services on these sites is growing.
In addition, no matter how rapidly NFC technology develops, its audience is already initially limited. This is because the NFC-enabled mobile phone is tied to a bank card, which not everyone has. So, a minor user will not be able to use NFC to pay. And such users have the lion's share of the market, as long as the gaming industry continues to develop. And this once again proves that SMS payments are a necessary tool for that part of the audience, which for one reason or another cannot use NFC payments.
2. Scope of application.
NFC is not in vain called the technology of the future, because the wide range of its application is obvious: the technology can be applied in almost all areas, including medicine, education, sports, business and the service sector.
In the future, the happy owner of a smartphone with an NFC module will not have to carry a wallet with him: any service, whether it’s buying a hamburger in a fast food restaurant or paying for parking, can be paid using your phone. With a good deal (infrastructure development for NFC), there is a chance that cash will even go by the wayside. The process of payment using the NFC-module is much faster than payment in cash, and there is no need to carry paper and metal money.
With the development of the mobile industry, and most importantly the development area for mobile software, the number of sites that can be accessed from a mobile phone and the number of users who do not ignore this opportunity has increased. Accordingly, the amount of money they spend on these sites has grown. Traveling the site from a mobile, the user pays for various services with his help, just by sending an SMS to a short number. Thus, he saves time and receives service using only a mobile phone and access to the Network. Therefore, the online services that the Internet is filled with undoubtedly need a form of payment such as PSMS. This is both dating sites and social networks, file sharing, torrent trackers, paid access forums, sites with content for a mobile phone, online games and other services. This payment method allows you to purchase virtual goods that do not have physical value in online games with their virtual worlds and in social networks. On various sites, users buy virtual currency, pay for registration, VIP statuses, participate in polls, give gifts to friends.
3. Security.
Vulnerability of NFC technology as a virtual wallet, according to experts, exists. If the phone to which the bank card is attached is lost or is simply stolen, the “new owner” will have direct access to your money. While you will call the bank in order to block your card, someone can already manage your finances. Very often, Russian banks prescribe in the card issue agreements a clause stating that they do not cover and are not liable for all losses that you incur until notification of the theft.
PSMS, like any other payment method, occasionally encounters fraudulent activity. Unreliable sites are often trusted by naive users. The only effective way to deal with fraudsters in this area is to inform Internet users about all possible fraudulent tricks and tricks. If users are notified in a timely manner, this will protect them from visiting such sites, or at least help to be more vigilant.
Be that as it may, it is unprofitable for such mobile operators to work with such sites, since they lose the trust of subscribers, and they leave to competitors, or billing companies, because if they ignore user complaints, they also lose trust and reputation, and accordingly - and customers along with earnings. Tight regulation by operators and careful verification of each project before it is connected on our side minimized the number of incidents related to unauthorized withdrawals from mobile subscribers' accounts.
However, not only Internet users are victims of scams. Cellular operators and billing companies also face the security problem of SMS payments. In this case, we are talking about fraud. Fraud is a fraudulent activity that is carried out using a mobile phone. Simply put, fraud SMS is a paid message sent from a number that has no funds on its account. Until recently, fraud was one of the main security issues of SMS billing. Now billing companies have made every effort to ensure that the fight against fraud is effective. Antifraud restrictions apply and the amount of fraud is noticeably reduced, which is good news. Mobile operators are constantly updating platforms, improving security tools, thereby reducing fraud traffic,
4. User countries.
If it is sensible to look at which countries are really ready to accept NFC technology, it becomes clear that few are ready for this. In order to introduce technology and enable it to function, a pre-formed base is needed. It will not be enough just to announce that NFC technology has already appeared in this country, because it should first of all be available to potential users. In developed countries, the development of NFC did not stop at the embryo stage, but went further: the consumer segment began to develop gradually, new business models appeared, it became possible to pay for goods and services using NFC.
In addition, the direct connection of bank cards with NFC technology implies the development of a credit card payment system and the presence of these cards in more than half of the population, and this is not characteristic of all countries. In other words, potential users of this modern technology are residents of countries in which almost everyone has credit cards.
The most active countries in using NFC are: Japan, Korea, Germany, France, Australia and the USA. In Japan, interest in contactless payments has appeared for a long time. As a payment method, the Japanese are actively using NFC at gas stations, railway stations, cafes, grocery stores, and in the near future, the payment system will be available even in a taxi. South Korea is not far behind Japan, and very soon its residents will be able to pay for travel and shopping using a phone with an NFC chip. France supported the theme of technology development with the opening of the world's first NFC supermarket. For the US, NFC is a well-grounded transition to the next level: Americans don’t really like cash, so such a simple and cashless payment method has already won the sympathy of American users. In addition, the technology is supported by leading US carriers Verizon Wireless, AT&T Mobility and T-Mobile USA and mobile phone manufacturers. Referring to ABI Research, in the US by 2017, the turnover of NFC payments will amount to 191 billion dollars.
Today, the use of contactless technology in Russia is also gaining momentum. So, the Big Three is trying to keep up with each other and is already introducing the technology with all its might into all kinds of areas of activity: you can find special NFC-readers for paying for goods and services in Megafon salons; Using NFC technology, MTS allows you to pay for fuel at gas stations; Beeline - for travel in the subway. However, there are two main factors that directly impede the introduction of NFC technology into the masses. Firstly, this is a lack of awareness among potential users about the existence and capabilities of NFC. Secondly, as already mentioned, there is as yet no infrastructure for the establishment of which both financing and time are needed.
According to analysts, progress in the development of NFC will not be in all countries. The highest levels of technology penetration will occur in North America and Europe.
Summing up, we can say that contactless payment technology has something to fight for in terms of attracting potential users. If SMS payments have already managed to prove themselves and increase user loyalty, then NFC needs more than one year to strengthen its position in the payment market. NFC technology is universal, in addition, it opens up new opportunities in the field of mobile payments, but at this stage not all countries are ready to meet with it. Nevertheless, there is a huge possibility that the technology will pick up large momentum. Thanks to time savings and an easier payment process, NFC has already managed to attract the attention of many leading IT companies that are in a hurry to add new devices with the latest technology.
According to some experts of the mobile market, SMS payments are yesterday, but this opinion is erroneous. Today, the sphere of SMS payments is actively developing and at its core are all the same good old SMS messages. For example, there was a direct carrier billing, which increased the income from the sale of media content, because those users who did not want or could not use a bank card as a payment tool began to buy it. In turn, subscriptions have become popular on sites that allow users to pay for a certain period of using the service. In addition, the development of SMS payments is not only due to Internet users, but also due to new commercial solutions. With their appearance, the range of goods and services that can be paid via SMS message, including even payment for parking, is expanding.
The growth of the market of SMS payments in the world
Forecast of the development of the market of mobile payments in the world
Definitely, the markets for the use of NFC technology and PSMS are different. Summing up, we can say that the development of NFC does not threaten an early death for SMS payments. Each of these payment methods has its own audience and the sphere in which it is most developed and appropriate. Based on this, it can be concluded that the wind of changes that came with the innovative NFC technology will not move SMS payments from a confident position, but will complement the market. PSMS and NFC can exist in parallel and independently from each other, developing in different directions, which is uniquely only for the benefit of consumers who can choose the most suitable payment method for themselves.