Virtual Wallet: Changing the Way Consumers Purchase Goods
Soon, using anything other than a mobile device to make a purchase may be comparable to watching a film on VHS or listening to music on a cassette tape -- a thing of the past. The future of mobile payment systems is changing the way consumers purchase goods and services. In 2011, companies like Google, ISIS, Square and PayPal laid the groundwork for mobile payments, creating global partnerships and establishing baseline technologies. Now, “mobile payments” has become a buzz phrase for 2012 and continues to grow in popularity. According to new data from NPD In-Stat, mobile payment transactions are expected to surpass $9.5 billion by 2016.
Credit card companies like American Express, Visa and MasterCard are paving the way for a more widespread adoption of mobile payments among consumers. However, in order for mobile payments to continue gaining popularity, these companies must educate their customers about the technology; this may be difficult to understand given that mobile commerce is more complex than traditional methods of purchasing. Payment firms are likely to further entice consumers through marketing methods that include loyalty programs, vouchers and bonus opportunities for customers who choose to use mobile payments.
While the impact to the consumer is obvious and significant, the impact to the behind the scenes ecosystem will be profound. All of these changes will ultimately require companies to update the billing and compensation systems to support emerging and fluid multi-party B2B relationships. Service providers will have to cater to the new demands in the market created by this more complex ecosystem. Frost & Sullivan’s Stratecast has already identified the adoption of an approach called agreements-based billing (ABB) and compensation as one solution to this problem.
The firm has deemed ABB a key to future success and a technology to watch due to its ability to easily monetize the almost infinite array of complex financial relationships common to next-generation services. When dealing with mobile payments, vendors can use ABB to handle the constantly changing set of multi-party billing agreements between carriers, mobile phone manufacturers, credit card companies, financial institutions and other players. These agreements can be quickly built and personalized to support case-by-case and customer-by-customer negotiations.
For example, let’s discuss what happens in a mobile wallet transaction. Multiple parties, including merchants, mobile service providers, payment system providers, credit card issuers, clearing banks, retailers and others, are involved in this transaction path. Each of the players involved has unique relationships based on pre-defined conditions and financial definitions that determine which player receives what from each sale.
These relationships can be extremely complicated, especially when the conditions are extensive, terms are interconnected across participants, and money is flowing in multiple directions. This is where the old fashioned method designed for two-party interactions fails. As businesses evolve and begin using this multi-party payment model, the technology behind the transactions must evolve with it. The ability for these solutions to be flexible enough to support change is key to enabling business owners’ success. This is the world of ABB.
The evolving world of virtual currencies and mobile payments reinforces this argument. If there is a consumer demand for the technology, today’s enterprises need to make changes in their IT infrastructures in order to accommodate the shift.
As previously noted, ABB is already making strides. As John Sims, president of Sybase 365 said, “material advances for mobile payments will only come about when banks, operators and retailers can converge on a business model, and with it true industry interoperability, leading to a widely embraced mobile payments system.” The mobile wallet will find its place in the consumer market soon enough, and ABB will ensure that it works when it gets there.