In a scenario that’s becoming more and more familiar, a shopper walks into a clothing store, eyes up a dress or jacket, and in seconds find a less expensive deal online via her smartphone.
Smartphones and tablet computers are becoming consumers’ wallets, as evidenced by the purchase of books and movies via Apple’s App Store to mobile check-ins for flights, conferences and even hotel rooms.
A more troubling reality for a small country like Ireland is that its businesses, particularly retailers, risk being left behind.
Irish consumers spent some €4bn online in 2012 and €3bn of that revenue was spent with international sellers.
Mobile payments economy
The mobile payments economy is on the rise. Last year, 275m smartphones with wireless connectivity technology called near field communication (NFC), shipped globally, according to research by IHS.In the US, Google has been trialling mobile wallet services with Google Wallet in New York and San Francisco, California, albeit with limited success. Yet e-commerce giant eBay Inc’s mobile commerce volumes last year grew 88pc, with eBay reaching US$22bn and it subsidiary PayPal hitting US$27bn in 2013.
“The future of money is mobile," said Louise Phelan, vice-president of global operations for EMEA at PayPal, where she leads an Irish-based workforce of almost 3,000 people.
The original vision for PayPal was letting people pay each other via a mobile device – the Palm Pilot, the iconic 1990s electronic organiser.
Now people around the world are embracing the smartphone as a convenient way to shop and pay anytime, anywhere, Phelan said.
“We’re entering the third age of money, Money 3.0. Money 1.0 was cash, Money 2.0 was credit and credit cards, and Money 3.0 is mobile."
At the recent Mobile World Congress in Barcelona, Spain, Irish e-payments player 3V joined forces with Orange to launch Orange Cash, a prepaid card and its accompanying app, for Apple iOS and Android smartphones in Spain.
Alan Dunne, head of marketing at 3V, said the term ‘mobile payments’ is hard to define, and the lines can blur.
“It’s really a catch-all term used for a variety of new technologies and services," he said. Paying with a mobile, paying in an app, or taking payment using a mobile as a sort of point-of-sale device are all under this umbrella.
“We prefer the term ‘mobile money’, meaning a spectrum of services where the mobile phone is a key component – as a management tool as much as a payment instrument," said Dunne.
“For example, even many traditional payment cards now have an accompanying app, something we brought to market here first, with O2 Money. We would ensure even a normal 3V card programme has an app to check balances, transactions, manage security and card PINs."
It’s the merchant that has the problem
Donal McGuinness, managing director of Escher Interactive, which has retail software in more than 30 countries, has been been involved in mobile payments in Ireland for more than 10 years.
“It is not a new thing, but there is one important point that we need to understand," he said. "The consumer does not have a problem. There are plenty of ways to pay for goods that are more convenient than using a mobile phone. It’s the merchant that has the problem."
Smartphones, 4G, NFC and QR codes are all tools to help achieve the ultimate mobile payment experience, yet they must do more than merely mimic the card-payment experience to generate scale, McGuinness said.
Mobile payments in this broader sense will be a huge success and change the interaction in retail and online, he added.
Escher Interactive is targeting a wide audience for mobile engagement. It includes payment, yet this payment event is the end result of a rich, in-store consumer engagement that ultimately leads to a payment.
Phelan said PayPal is also working closely with retailers and developers to help them create the best possible experience for their customers on mobile devices.
‘Pay by mobile’ will go mainstream within a few years, she said.
“We’re seeing a lot of interest from retailers and other businesses in how we can help them create great experiences for their customers on mobile, and how mobile fits into their ‘omnichannel’ strategy – recognising that consumers want to have the same great, consistent experience whether they shop online, on mobile or in-store," Phelan said.
Making the switch
In Ireland, there are still lots of businesses that have yet to switch on to the opportunity offered by mobile and online commerce, she added. Through programmes such as ‘Activating Dublin’ and PayPal Startup Blueprint, PayPal is doing its bit to help.
While mobile makers such as Samsung have installed NFC chips in its latest consumer devices, others, such as Apple, have yet to do so. This begs the question then, will consumers’ phones be used to carry currency or pay for goods at store counters, or will transactions happen via apps in the cloud?
In the US, Jack Dorsey, chairman of Twitter, is powering ahead with his Square start-up, a device that sits on smartphones and can process credit-card payments, while brothers and Stripe co-founders John and Patrick Collison from Limerick are trying to make e-commerce as fluid on mobile and web pages as app purchases are on the App Store.
“This will ultimately be answered by consumers," said Dunne. "There have been so many wallets brought to market that haven’t yet clicked with the public, often because they are trying to serve a need that as yet doesn’t appear to exist."
Easier life, more acceptance
Mobile wallets will only gain wide acceptance when they make life easier, not more complex for the user, and link up cleanly to other services, such as in-app payments, transport and loyalty, said Dunne.
NFC is a good example of the challenges, Dunne added. Despite many phones being enabled for NFC, and many mobile operators offering payments through it, NFC made up only about 2-3pc of mobile transactions in 2013. This may change with some recent announcements from Visa and MasterCard, which aim to make it easier for new players to enter the NFC space and offer new products, yet again it needs to be compelling and straightforward for the consumer.
“Products like Square, which allow phones to be used to take card payments, could indeed have a future, as they make it easier for smaller merchants to operate," said Dunne. Yet this is a crowded space, so it is likely to be another couple of years before it consolidates and matures.
In terms of the future of cash and whether mobile money will eventually wean Irish firms away from cheques, McGuinness said cash will never be replaced.
“It can be minimised, but never replaced. I think it is a real goal to eliminate cheques and the usage of cheques has dropped significantly over recent years," he said.
The mobile wallet can accelerate this, he added, assuming of course the merchant service fees are attractive compared to cash.
“Regulation is also an important area here as we move to digital wallets, and even digital currencies. As these cash systems move to purely digital systems the regulations need to keep pace with the innovation," McGuinness said.
Benefit of mobile payments
Phelan agrees cash and cheques will be around for a few years, yet mobile payments will mean consumers need never worry about running out of cash or having to carry a cheque book.
Businesses will also increase sales because customers will no longer be out of cash, she said.
“Ireland’s love affair with the smartphone and our young and tech-savvy population make it a perfect place to create the future of money," said Phelan. "We’re working with Irish businesses to help bring ‘pay-by-mobile’ to our city centres. And with almost 3,000 working for PayPal and eBay in Ireland, our own people here are playing a key role helping to create the future of money, Money 3.0."
Yet considering how slow Irish retailers have been to adopt e-commerce, could the mobile revolution be over by the time Irish retailers cotton on?
Irish retailers can do more to harness the opportunity that is presented by global online retailing and the rise of mobile, said Phelan.
“We know that half of Irish smartphone users have made a purchase via their phone," she added. "We also know that Irish consumers spent €4bn online in 2012, yet only half of Irish businesses have websites. Furthermore, 2011 research showed that 75pc of purchases made that year were going overseas."
The reality is, Phelan said, Ireland has not seen anything to suggest any significant change since.
“The opportunities are vast and we are working very hard with our retail customers to give them every opportunity to participate and succeed."
A version of this article appeared in The Sunday Times on 9 March
Mobile payments image via Shutterstock