mba thesis- the growth & future of mobile payments

MBA Thesis- The Growth & Future of Mobile Payments 2016

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MBA Thesis The Growth & Future of Mobile Payments

Submitted by

Guo Jian

Student no.10021507

Amsterdam Business School, University of Amsterdam

Supervisor: Dr. Jean Lynne Johnson


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Contents

ABSTRACT ............................................................................................................................... 4

Purpose: .................................................................................................................................................... 4

DESIGN/METHODOLOGY/APPROACH .............................................................................. 5

Findings ..................................................................................................................................................... 6

Keywords ................................................................................................................................................... 6

EXECUTIVE SUMMARY ....................................................................................................... 7

INTRODUCTION ..................................................................................................................... 8

Different Types of Mobile Payments ...................................................................................................... 10

PURPOSE OF LITERATURE REVIEW ................................................................................ 11

LITERATURE REVIEW ........................................................................................................ 12

Understanding Mobile Payments ........................................................................................................... 12

Stakeholders Involved ............................................................................................................................. 15

Current Scenario on Mobile Payments ................................................................................................... 16

Advantages and Challenges .................................................................................................................... 19

Future Scope ........................................................................................................................................... 23

E-WALLETS ........................................................................................................................... 26

Introduction ............................................................................................................................................ 26

Types of E-wallets ................................................................................................................................... 29

Open Wallets ....................................................................................................................................... 29

Semi-Open Wallets ............................................................................................................................. 29

Closed Wallets ..................................................................................................................................... 29

Semi-Closed ......................................................................................................................................... 29

Evolution of authentication and payment methods used in e-wallets ................................................... 30


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Operational Apparatus ........................................................................................................................ 32

Benefits of E-Wallets ............................................................................................................................... 33

Flexibility. ............................................................................................................................................ 33

Security. .............................................................................................................................................. 33

Reduces banking costs. ....................................................................................................................... 33

Facilitates E-Commerce ...................................................................................................................... 33

Boosts Economy .................................................................................................................................. 33

The Future of E-wallets ........................................................................................................................... 35

Online Shopping .................................................................................................................................. 35

Price Comparison Shopping ................................................................................................................ 35

Bill Payments ....................................................................................................................................... 36

Loyalty Rewards .................................................................................................................................. 36

Personal Information Access............................................................................................................... 36

Virtual Personal Organizer .................................................................................................................. 36

Wireless purchasing at physical stores ............................................................................................... 36

Pre-emptive Buying ............................................................................................................................. 36

D2D/P2P Payments ............................................................................................................................. 36

SURVEY ANALYSIS ............................................................................................................. 37

Survey Results ......................................................................................................................................... 38

Inference, Findings & Conclusions .......................................................................................................... 47

APPENDIX 1 ........................................................................................................................... 49

Survey questionnaire .............................................................................................................................. 49

APPENDIX 2 ........................................................................................................................... 53

Survey Summary ..................................................................................................................................... 53

REFERENCE LIST ................................................................................................................. 57


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Abstract With the digitalization of world economy, digital money- as a mode of payment is not only catching up as a trend; but is also becoming a habit as a consequence of the convenience that it offers.

The mobile payment industry has been under transition and boasts of a history of numerous tried and successful endeavors. Mobile payments assure a future of promising yet uncertain possibilities. At this point, this study analyses the current state of the mobile payment industry from a literature review perspective and then moves on to a qualitative & quantitative analysis of the present scenario by means of a survey with a sample size of 200 plus participants. The report reviews literature on mobile payments presented by scholars and data scientists in the immediate past; analyzing the various factors that impact mobile payment industry. The Survey Analysis then describes the present scenario and gives an indication towards the future in this field.

The report will discuss the impact of various social and cultural factors on mobile payments, and present a comparison between mobile payments v/s the traditional payment methods.

Purpose: The purpose of this report is primarily to identify the scope of this mode of payment and the kind of shape it will progress into in the near future. We will also understand and analyze the growth and future prospects of The Mobile Payment Industry.


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Design/Methodology/Approach The research is based on a qualitative& quantitative analysis. The study is strongly supported by literature review of research conducted previously.

An extensive survey reveals the trends in which Mobile payments influence the paying behavior of participants ranging from 18-75 years of age. The survey also highlights what are the factors that are affecting the credibility and growth of Mobile Payments.

An online survey was conducted across multiple nationalities among people from varied age groups and income groups. The participants were selected by a non-probability sampling method.

The major drawback of the survey was that it did not allow estimation of the extent to which the sample statistics are likely to vary from the population parameters.

This survey explored the current market and analyzed the global mobile payment market at consumer level. The global mobile payment market is classified in terms of application, mode of payment and age groups.

Classification by application

• Merchant purchases • Money transfers • Bill payments • Cheque • Others

Classification on the basis of modes of payment

• SMS • NFC • WAP • Others

Classification by age group

• 18 to 24 • 25 to 34 • 35 to 44 • 45 to 54 • 55 to 64


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• 65 to 74 • 75 or older

Findings The research reveals that the trend of mobile payments is gaining popularity with all age groups and it specifically shows a larger interest amongst the young adults. The research reveals that mobile payment is not just instant; it is also extremely convenient and secure mode of payments. The study clearly shows a positive inclination from consumers towards mobile payments. Mobile payments have come a long way from the time of its inception and the extensive engagement from a huge consumer base hints towards a promising future for this medium.

Keywords Mobile payments, e-wallets, e-money, online transactions, e-wallet


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Executive Summary The key findings of the report “The Growth & Future of Mobile Payments”:

• Mobile payments led the e-commerce payment market in the first quarter of 2016, with

a market share of 53.8%; also expected to retain its dominance during the second &

third quarter.

• Based on application, online purchase segment dominated the mobile payment market

with 76.7% market share in the first quarter of 2016, also expected to retain its

dominance during the second & third quarter.

• Based on mode of payment, the Cash payments dominated the global payment market

in terms of convenience, with 82% market share the first quarter of 2016.

• Based on age groups, the 25-34 age group dominated the global mobile payment

market with 59.4% market share in the first quarter of 2016.


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Introduction The 21st century can also be understood as an era of digital revolution where technology has penetrated almost every aspect of our lives. With the invention of mobile technology in 1973 by Martin Cooper, no one had realized that such an innovative tool, over a period of time, would offer much more than just being one of the primary sources of communication. Over the years with the advancement in scientific technologies and integration of different ICT tools with the mobile devices led to the inception of smartphone in 1992. The concept of personal data assistance (PDA) came into existence where the mobile phones were given the potential of managing various additional tasks of the individuals apart from offering connectivity. In addition to that, with the coming of Web 2.0 and greater scope for interactivity between multiple different users created numerous opportunities for the enterprises in the domains of learning, commerce, entertainment and many more. What was witnessed was a convergence between the physical and virtual space where virtual is gradually overcoming the challenges which the physical tend to offer. One such important change was the launch of e-commerce and the idea of market-at-doorstep. With multiple varieties of online stores offering a diverse range of products to the user through a single window of operation was truly in itself a big game-changer for the existing markets all across the globe. The consumer was no longer limited to the geographical boundaries of his/her state rather was exposed to such a space where knowledge on any kind of commodity situated anywhere across the globe, could be accessed at any point of time via ICT.

Similarly, the idea of mobile based payments is seen as another big step in the global markets as a means of exchange. History is the biggest proof on indicating how over the period of years, with the change in the forms of technology and knowledge, man has sought to evolve the means of exchange to such a progressive stage where sale and purchase of goods and services have been made as easy and convenient as possible. From the traditional modes of barter system to the gradual shift to minted coins and later on to gold and currency and plastic cards are some of the clear indicators on how man has utilized the knowledge in making different kinds of exchange of commodities and services within domestic and beyond, possible with lesser complications.

In the present times, the rise of mobile based payments can be seen as the next revolutionary step as it is a clear indicator of how the concept of ‘Global’ is expanding. Mobile phone, from being an instrument for communication to a tool to allow monetary exchange, as a matter of fact, complements the idea of a global wallet. The individual no longer is dependent upon the physical forms of money. Today, the consumer can at any point of time access currency of any value and of any region as quickly and conveniently as one can imagine. Mobile based transactions, such as mobile banking, remote purchases, person to person [P2P] transfer and


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point-of-scale [POS] are some of the important features accessible to the individual in today’s age.

The aim of this report is to basically offer an overview on how mobile payments are changing the ways in which people are engaging in the sale and purchase of goods and services. The study offers key highlights on the 4 primary categories of mobile based payments as well as an introduction to the stages of evolution from physical forms of payments, i.e., currencies and coins to a cashless mode of e-payments and also how in the near future the next generation will be utilizing such mode of payments.


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Different Types of Mobile Payments Today we can use Mobile Payments to purchase innumerable goods & commodities from e-commerce websites & online stores.

Post selection of the item that a buyer needs to buy, the most important aspect is making the payments. All the e-commerce websites & online stores are integrated with a payment gateway by either purchasing APIs or developing one themselves. These payment gateways integrate various options to make these Mobile payments.

The most prominent options that are available at present are:

• Credit cards: Credit cards are like taking a short term loan that the consumer has to pay back (usually within 30 days), failing which the consumer will be charged interest.

• Debit cards: Using debit card money is using money from your account. With a debit card, the consumer can only spend the money that is available to them.

• Net Banking: Net banking is an electronic payment system that enables the customers of a particular bank or any other financial institution to make transactions through the Bank’s or the financial institution's website.

• E-wallets: It is an electronic feature that enables you to use the other Mobile payment modes without passing on your information to third party websites. E-wallet payments are channelized through payment gateways that keep the information completely encrypted.


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Purpose of Literature Review

Evolving from a small text message based transaction to an interoperable [UPI] model; mobile based payments have come a long way. At present the proliferation of mobile wallets and other mobile solutions have increased the trend of mobile transactions as a greater number of B2B and B2C consumers are making the decisions to pay through their smart phones or through cashless cards. The principle idea of this literature review is to understand how the mobile identity of more than 3 billion people, across the world, would make this mode of payment simple, instant and seamless as at the same time how will it be kept secure.

The purpose of reviewing the literature on mobile based transactions is primarily to identify the scope of this mode of payment and the kind of shape it will progress into in the near future. It will also help in identifying the pivotal questions such as the basic concept of mobile payments, the kind of stakeholders involved, pre-conditions for the acceptance of such forms of payment, the benefits and challenges as well as its future scope. It will help in providing clarity on how the modes of exchange are getting shaped up through the inception of such forms of payment. It will also help in understanding how different enterprises are making use of this mode of exchange and how successful have they been in terms of their process of adoption. Through review of literature, it will be possible to design a set of questions, influenced by already established work, focused on key aspects, which may help in providing a new basis of understanding on mobile based payments.


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Literature Review

Understanding Mobile Payments

The ISACA paper (2011) on “Mobile Payments: Risks, Security and Assurance Issues” offers an understanding of the whole process as the payment made for different products and services, where the realization of payment is made through any mobile based device such as smartphones, etc. between two or more parties. The report highlights as to how mobile devices have altered the functioning of everyday life and business specifically in terms of communication and how financial transactions too are undergoing a change in the contemporary scenario. Mobile device already has a mass appeal from different customers. The moist important fact is that they are very open to learn/understand the technology in order to fulfill multiple different needs like using web banking sites to make secured transactions1. A newer opportunity that has been seen to be emerging for the service providers and merchants are the use of mobile phones as mobile wallets. Consumers are willing to utilize mobile phones for payment purposes apart from various other infotainment purposes. Mobile phones are already creating a space and opportunities for the growth of different financial activities in different countries. There already exists a scenario where the number of phone users are exceedingly more than the individuals having bank accounts2. This is a very important indicator for interpreting the scope of growth of mobile based payments in the global market space.

The Oracle report “Simplicity is the Ultimate Sophistication: The Future of Mobile Payments (2014)”, explains how mobile payments can be a revolutionary step in terms of transactions in the same way as that of card-and-terminal systems. Mobile payments have been existing in parallel with the electronic payment forms and internet banking facilities. However, the technology itself was new and not mature enough to be accepted by a larger section of people. As a result, the consumers’ adoption towards this technology was minimum3. However, with the evolution of technology over the coming decade, particularly in the direction of contactless credit and debit cards along with advancement in RFID and NFC technologies has led to a redevelopment of interests amongst the people towards mobile based payments as well as far greater awareness in the market towards its future potential4.

1 Mobile payments: Risk, security and assurance issues (2011). Retrieved from http://www.isaca.org/knowledge-center/research/researchdeliverables/pages/mobile-payments-risk-security-and-assurance-issues.aspx

2Ibid. 3 Simplicity is the ultimate sophistication: The future of mobile payments (2014). Retrieved from http://www.oracle.com/us/industries/financial-services/future-mobile-payments-wp-2346929.pdf 4Ibid.

http://www.isaca.org/knowledge-center/research/researchdeliverables/pages/mobile-payments-risk-security-and-assurance-issues.aspx


http://www.oracle.com/us/industries/financial-services/future-mobile-payments-wp-2346929.pdf


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In the past, the payment industry projected a lot of resistance in accepting credit cards. It was far easier to promote the idea to the retailers and consumers because of the POS system and exhibiting how credit cards were easy and convenient replacement for cash. In the current scenario, the transactions made through cards only require seconds to process. Even with the advancement of computer technologies, a far greater volume of transactional data can be processed with ease5. As a matter of fact, with the improvement in software tracking, monitoring, and reporting, there is far better scope now to prevent any kind of financial risks. Even the proliferation of credit and debit cards is also tremendous. Last year’s statistics indicate that 175.6 million cards have been issued out of which 55.4 million are credit cards, 6.3 million are charge cards, 95.7 million are debit cards, and 18.3 million are ATM-only cards. Despite this transition, the financial industry’s overall process of growth has been rather slow. As a result, the shift from the need for carrying physical wallet to digital money is taking much time than what it was expected to, by different experts. However, this does not imply that mobile based payments have no scope in the market6. There exists an understanding that it holds immense potential and can be a big agent for change in the financial markets.

Mobile payments have been categorized on the basis of the technology used. These mobile based payments have been classified as proximity and remote7. These two types of mobile based payments drive the nature of the payment service model, the value proposition for both the consumer and merchant, and the relevant technologies and infrastructure considerations required to realize the type of mobile payment.

Proximity payment generally refers to contactless payments. The payment credentials of the user are stored in the mobile device itself and, during any mobile based transaction, are made accessible through NFC technology with the help of a compatible payment terminal. Here the device itself is a contactless payment card. Contactless payment through mobile devices can also be used remotely such as in making an online purchase. The user will only be required to swipe his/her mobile device over a contactless NFC reader plugged onto a personal computer (PC) or any similar device.

Remote Payment, on the other hand, involves payments done through a mobile web-browser or a resident smartphone application. Here the mobile device is playing the principle role of authenticating the personal information which is stored remotely. These kinds of payment solutions can be both face to face or vending machine based8.

5Ibid. 6Ibid. 7Mobile payments: Risk, security and assurance issues (2011). Retrieved from http://www.isaca.org/knowledge-center/research/researchdeliverables/pages/mobile-payments-risk-security-and-assurance-issues.aspx 8 Ibid.




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The report further explains another kind of categorization for mobile based payments, namely, bank-centric and non-bank centric. The bank-centric model is the one where the account details of the customer are held with the bank. All the matters relating to laundering, fraud etc. come under the local, national and international banking laws and regulations. Whenever the customer initiates the payment, it is the responsibility of the respective bank to authorize the transactions. Traditional payment networks such as Visa or MasterCard are used here. However, the key differences that lie here are the endpoints of the transaction9.

However, in the non-bankcentric model, the details of the customer’s account are held by a non-financial organization like an MNO or any third-party payment service like PayPal. This model raises a lot of questions pertaining to regulatory behavior, security and even profit sharing.

However, there has been a change in the laws and regulations regarding mobile based payments. Europe, for instance, has experienced a considerable ease in restrictions in payments which can have an impact on the overall mobile payment scenario. New players like mobile operators, department stores, etc. are getting recognized as potential Payment Service Providers (PSPs) without having the status of a traditional credit institution (as defined in the European directive 2000/12/CE). These players compete directly with the traditional financial/credit institutions keeping in consideration, the compliance towards the requirements that are set out in the directive. These players can also act as an Electronic Money Issuer (EMI) or a PSP where they can offer services such as cash deposits, cash withdrawals, direct debits, credit transfers, etc.

The European scenario is such that there are already a good number of competitors having electronic money issuer licenses in Europe with the help of internet giants like PayPal and Google. This has led to the emergence of start-ups like Crandy, Luup or Tunz. However, the bank-centric NFC-based payment model seems to be more predominant. Although nonbank-centric payment systems do exist and are in use, however, not many agencies have adopted the model, thereby making its progress slow10.

9 Ibid. 10 Ibid.


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Stakeholders Involved The mobile payment ecosystem is a large system and there are multiple key players involved. The ISACA report (2011) identifies the stakeholders in terms of consumers, financial service providers (FSPs), payment service providers (PSPs), in-service providers (merchants), network service providers (NSPs), device manufacturers, regulators & application developers etc. These stakeholders possess the ability of fulfilling variety of roles such as debit/credit card networks, clearing/settlement organizations, software solution providers, third-party payment processors, MNO/wireless operators, etc.11 These stakeholders primarily engage to take their share of the revenue through debit/credit card networks and MNOs compete for the role of FSP and NSP as well as the associated transaction fees. Mobile based payment can be seen as one such application amongst many other existing in the market.

Each stakeholder has a different value proposition which can be understood as under:

Mobile operators:They add value to their commercial offers through a new set of services that can offer them to increase their average revenue per user (ARPU). This is due to the new revenue streams that come from different sources, such as transaction fees, data traffic and financial services etc.12 Banks:Mobile payment can be an asset for the banks as it can create an opportunity to offer more interactive services13. For instance, providing credit at the point of purchase to various customers. Merchants:Mobile contactless payments can offer new opportunities to the merchants. For instance, merchants can offer loyalty programs, through e-coupons that can be consumed by swiping the phone during checkout14. Transportation operators: There already exists a system of cashless transaction within the transit system of different international zones. Transportation sector can be an apt domain to utilize mobile contactless services on a large scale. Through an e-ticket integrated within the the mobile phone can help in making daily travel more convenient and raise consumer

11Ibid. 12Ibid. 13Ibid. 14Ibid.


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satisfaction as well. Here mobile based applications for e-ticketing can help in reducing costs to a considerable margin15. Ticket vendors: Multiple infrastructural locations like halls and museums can make use of mobile based transactions in processing the entry fee for customers through NFC technology. This can enable a lot faster sale of tickets and that too from diverse set of locations. In addition to that, it can offer the purchasers to easily check-in for an event instead of waiting in the lines and queues. Even the event organizers have far greater scope in sharing great details about the event along with the ability to sell tickets for an event through mobile based applications. However, there too emerge questions regarding the business model and how the process of value sharing is taking place. This requires further analysis16. Under the NFC model, a new stakeholder has been introduced. This stakeholder is known as Trusted Service Manager (TSM). It is a trusted third party which used to manage the mobile based financial applications17. With the involvement of a TSM the mobile payment cycle includes a financial institution which has to curate account data and transfer the information to a TSM. The TSM, then has to deliver the consumer’s account information over the air (OTA) through the mobile network to a secure element in the mobile phone. Once the payment account is transferred to the phone, the consumer can then make use of the phone as a virtual payment card in places where contactless transactions are possible. The mobile operators’ network, is used here during the personalization of the device. The TSM also has the responsibility of handling the life cycle of the device in order to administer the customer account data federation between the mobile phones and also deactivate the NFC chip in the case of theft.

Current Scenario on Mobile Payments

Accenture in its “North America Consumer Digital Payments Survey Report (2015)” has clearly highlighted as to how consumers are gradually moving towards a kind of payment services which are simple (the simplest form of payment), personal (payment options being as individual as they can be) and can be utilized everyday (seamless everyday solutions). The current trend as per the report indicates that there has been a considerable rise in the awareness in terms of mobile based payments. However, the preference for using cash as a mode of transaction followed by credit cards is still strong in the market. Although the consumers’ use of digital forms of payment has not witnessed any stall, however, it has also not showed any dramatic

15Ibid. 16Ibid. 17Ibid.


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increase in the usage as per last year. Still the momentum has been quite steady18. Common mobile based payment applications are still in much use by a section of the population. The existing pattern that is projected in the report is that a certain percentage of the population is making use of mobile based payments for quick services like food and drinks, grocery shopping, shopping from convenience stores etc. However, mobile based payments are not effectively used for payment of household bills, taxi services and telecom services etc. in comparison with the other services19.

Even the study carried out by Total System Services (TSS) on “U.K. Consumer Mobile Payment (2015)” presents some of the important facts such as the adoption of mobile based banking applications is no longer exclusive domain of the “digital natives” and a good number of individuals have been making use of mobile based payments during the last three months and were quite satisfied with the experience. However, security being one of the biggest hurdles has led to a slow progress in terms of adoption of mobile based payments. But given an atmosphere where these challenges of security can be properly addressed, a good number of people have shown interest in switching over to this modern approach of monetary transaction20.

The TSS report further indicates that around 59% of the total population was making use of mobile banking applications for monetary transactions. From the socio-demographic angle, there was a significant level of association between gender, income level and m-banking usage level. The data showed that men were more likely to use m-banking applications and that with the increase in the income levels, a rise in the use of mobile-banking was observed. The trend was such that in UK, most of the users utilized mobile-banking services for the purpose of purchasing items from e-commerce sites, purchase groceries, pay restaurant bills and etc. However, at the same time, the group also pointed out the fact that features like the ability to check the immediate balance, relaxation from PIN entry, choice in sharing of personal details etc. can be some of the key measures, if implemented properly, can be a big game changer for mobile based transactions21.

According to the Accenture report (2015), a positive sign in terms of mobile based payments that has been observed has been the rise in the level of population’s awareness about this

18When it comes to payments today, the customer rules (2015). Retrieved from https://www.accenture.com/t20151021T165757__w__/us-en/_acnmedia/Accenture/next-gen/na-payment-survey/pdfs/Accenture-Digital-Payments-Survey-North-America-Accenture-Executive-Summary.pdf. 19Ibid. 20U.K. Consumer Mobile Payment Study (2015). Retrieved from http://tsys.com/Assets/TSYS/downloads/rs_2015-uk-consumer-mobile-payment-study.pdf

. 21Ibid.

https://www.accenture.com/t20151021T165757__w__/us-en/_acnmedia/Accenture/next-gen/na-payment-survey/pdfs/Accenture-Digital-Payments-Survey-North-America-Accenture-Executive-Summary.pdf



http://tsys.com/Assets/TSYS/downloads/rs_2015-uk-consumer-mobile-payment-study.pdf



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mode of payment which in turn has complemented to the rise in the use of mobile based payments as well. However, the rise in the number has not been very satisfying but still it indicated the fact that mobile based payments have an immense potential in the coming future. For instance, coming of Apple Pay, has been a very positive move as a majority of the population has been extensively using it to fulfill any transaction via their mobile devices. In addition to that, effective post-transaction customer measures, as in the case of plastic cards, are also being witnessed in terms of mobile based transactions such as quick recovery in case of fraud, immediate notification in case of suspicious activity as well as payment initiation etc.22 One of the most driving factors for the adoption of mobile payments has been the availability of rewards. A greater share of the population has shown interest in using this mode of exchange if they are offered discount pricing or coupons based on past purchasing behaviors of consumers as well as offers through reward points. The similar strategy is also encouraging the non-users as well. Consumers’ interest in rewards can be seen as an opportunity for mobile payment providers to not only incent adoption, but to dramatically redefine how they can build customer loyalty as well. Some of these offers involve point-based rewards combined with merchant offers, product and fee/service relationship bundling, and tapping into a broader ecosystem of providers to bring customers additional and advice driven services23.

The report has further suggested that P2P payment applications have witnessed a considerable attention as well as adoption amongst the consumers. These kinds of consumer behavior are indicative of the ongoing discussions revolving around real-time payments. However, the principle attention is towards creating banking systems that can offer the services which are similar to what payment providers like PayPal offer within their eco-systems. These kind of systems can not only promote mobile payment adoption within the market but also offer scope for innovation of services within it24. As a matter of fact, the people’s feedback indicates that the consumers prefer having faster payment transactions or near real-time settlement, which is a feature of mobile based payments that has led to rise in the number of mobile payment adoptions amongst the people. Countries having the infrastructure for real-time payments in place have exhibited a strong mobile payment adoption by the people. It has also led to other mobile payment use cases such as consumer-to-business real-time payments. However, there is an uncertainty as to what extent will this consumer adoption of the digital payments will continue. Factors such as advancement in technology or new form of financial services offered by banks and network providers or start-ups etc. can be the driving force for digital payments adoption by the people. What is certain is that the whole payment scenario will continue to

22When it comes to payments today, the customer rules (2015). Retrieved from https://www.accenture.com/t20151021T165757__w__/us-en/_acnmedia/Accenture/next-gen/na-payment-survey/pdfs/Accenture-Digital-Payments-Survey-North-America-Accenture-Executive-Summary.pdf 23Ibid. 24Ibid.





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evolve and involve more and more digital based transaction services thereby creating immense scope for mobile based transactions in the future25.

Taking the case of Starbucks (PYMNTS, 2016) in terms of understanding mobile based transactions, it was found that the enterprise through its rate of earnings over the years, has earned the title of “undisputed leader in mobile commerce.” Howard Schultz, CEO of Starbucks, in the news segment “Starbucks Transactions Now 21 Percent On Mobile (2016)” confirmed that during the company’s first quarter earnings call with analysts, the numbers indicated that more than 21% of Starbucks transactions were mobile based, either in the store at the point of sale through a mobile app or by using Starbucks’ custom app for mobile based ordering and payment. In December, the sales figure through mobile based transactions witnessed a rise upto 22%. Starbucks has effectively utilized its greatest strengths of loyalty and customers’ dedication to a daily habit and has monetized it with a service aimed at making the transaction and ordering process easier. All this is being done through effective use of mobile devices26.

The strategy of Starbucks offering reward points to its customers supports the argument made in Accenture report (2015)27 as the daily Starbucks customers are rewarded with points whenever they are engaging in mobile based monetary transactions and that in a way is promoting further use of this mode of exchange. On the Mobile Order & Pay front, Starbucks is now seeing around 6 million transactions/ month and has started developing plans to expand the model to more cities and even more countries28.

Advantages and Challenges

The Oracle Report (2014) stats that consumer behavior has witnessed a tremendous change with the rise in the penetration levels of smartphones. The ability of rapidly communicating with anyone at any point of time along with the feature of accessing information at any point of time, smartphones have played a significant role in shaping the people’s lives in a new way. This has also impacted different forms of businesses and pushed them to adopt to the new ways to suit the consumer behavior. There has been a shift loyalty-based purchasing behavior to making logical, information-based buying decisions. Smartphones have been largely responsible for this

25Ibid. 26 Starbucks transactions now 21 percent on mobile (2016, January 22). Retrieved from http://www.pymnts.com/news/mobile-payments/2016/starbucks-transactions-now-21-percent-on-mobile/ 27When it comes to payments today, the customer rules (2015). Retrieved from https://www.accenture.com/t20151021T165757__w__/us-en/_acnmedia/Accenture/next-gen/na-payment-survey/pdfs/Accenture-Digital-Payments-Survey-North-America-Accenture-Executive-Summary.pdf 28 Starbucks transactions now 21 percent on mobile (2016, January 22). Retrieved from http://www.pymnts.com/news/mobile-payments/2016/starbucks-transactions-now-21-percent-on-mobile/

http://www.pymnts.com/news/mobile-payments/2016/starbucks-transactions-now-21-percent-on-mobile/








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shift as there is a concentration of wealth and information witnessed with the advent of smartphones29. As a result, with the advancement in the technological forms these behavioral adaptations to technological advancements are gradually shaping up the transactions in a more organized and consistent manner.

A trend has been observed where consumer’s experience, both offline and online experiences are merging together and sharing more or less similar shopping and payment interaction. Consumers in fact, are developing strong interest in having different business forms which are way less complex and require less degree of actions. These measures can ultimately help in shaping a universal commerce experience. All of this is only possible through development of ICT, specifically stable mobile based platforms for transaction and an effective online database for consistent information flow30.

Analysis of the global markets indicate that around US$ 4.6 billion worth of transactions are made through mobile based payments from a total of 224 million monthly transactions. With over 30 million active mobile money users, 520,000 registered agent outlets, and 150 mobile money services, the people making use of this technology have access to a wide variety of options. However, facilitation of all these options requires a wallet that can easily offer quick value and currency at any point of time. Mobile payments, therefore, have the potential to address all of these major concerns. Although recent developments in terms of innovation of mobile based services clearly show how mobile based payments are truly brining about a positive change in the global markets31. However, in order to have a far greater attraction and support of the users, the service providers are using the strategy of introducing a variety of value-adds to the process which is proving to be very advantageous to the consumers. These include highly-targeted, relevant, location-based offers; real-time updates of receipts and account information; and real-time customizable alerts etc. All these tactics are being used to ultimately convince the users about the simplicity and convenience of this technology that can help in giving the consumers more compelling reasons to change their modes of transaction32.

For example, African markets which have the potential, the process of proliferation of mobile devices and smaller spread of bank accounts is one of the key driving factors for growth by offering far greater access to financial and payment services33. In contrast, in developed markets like Japan and South Korea, mobile payments have been introduced through RFID to ease the payment process during mass transit. Around 59% of consumer electronics merchants

29Simplicity is the ultimate sophistication: The future of mobile payments (2014). Retrieved from http://www.oracle.com/us/industries/financial-services/future-mobile-payments-wp-2346929.pdf 30Ibid. 31Ibid. 32Ibid. 33Ibid.



21

have shown support to mobile payments, 53% in digital goods, 50% in apparel and jewelry, 45% in travel and event ticketing, with 32% in other physical goods. This is indicative of the fact that mobile based transactions are not simply a phenomenon of the developed regions, rather shaping up rapidly in the developing parts of the world as well34.

It is evident that a new form of technology will gain acceptance of the people across different parts of the globe if and only if it has a substantial number of advantages to offer. The ISACA report on “Mobile Payments: Risk, Security and Assurance Issues (2011)” reflect upon the benefits that mobile based payments have to offer. The report suggests that mobile based transactions offer an advantage of speed and convenience to the customer. Customers can conduct any cashless transaction at any point of time through their mobile device. The technology is also cost-effective and has the potential to cover different parts of rural areas where financial institutions are not in place. It can enable any user to transfer the funds to any account through mobile device at any point of time without the need to visit any financial institution such as a bank. Incase if an individual has access to multiple credit cards, he/she can consolidate the on a single mobile wallet thereby eliminating the need to carry the physical cards. Even from security point of view, PIN based authentication can be seen as far more effective and convenient. The geo-location feature of smartphones can help in improving security of the transaction as well as the capabilities of detecting fraud. Also service providers do not have to face the burden of handling too much of the user data as most of the information is stored in the mobile itself. Any seller, be it small or large can utilize mobile based transaction system without the need of having point-of-sale (POS) terminals as mobile devices will be far cheaper alternative to investing in hardware to accept electronic payments.

However, this modern technology does have certain challenges which may require some cost-value considerations from business perspective. If mobile based payment services are being used in different forms of business, then it is pivotal that certain agreements such as business model for revenue sharing, customer ownership, retooling costs to support mobile payments and regulatory measures etc. are all well in place35.

There are, however, risks involved. Fraudsters in the past have targeted different kinds of payment mechanisms and this is likely to be the case for mobile payments as well. Therefore, there is a dire need to have the countermeasures and security well in place in order to mitigate the risks36. The risks can be broadly classified as either traditional or emerging. Traditional risks can include denial or theft of services and loss of revenue, brand reputation and customer base. Emerging risks, on the other hand, include the use of mobile payments in money laundering 34Ibid. 35Mobile payments: Risk, security and assurance issues (2011). Retrieved from http://www.isaca.org/knowledge-center/research/researchdeliverables/pages/mobile-payments-risk-security-and-assurance-issues.aspx 36Ibid.




22

and terrorist funding. Risk for the participants in the mobile payments eco-system can depend upon the role of the entity user, network or communication provider, or payment service provider. The mobile payment transaction can be exposed to risks because the payment service involves several parties to perform jointly. This may worsen if these truncations based services are outsourced to potentially unregulated third parties without clear lines of accountability and oversight. As a result, if the security and regulatory measures are not well in place then there is a greater possibility of having fraudulent activities due to the consumers’ information being accessible by the third party agencies 37 . With careful planning that includes all the stakeholders, processes and technologies involved, it is critical to make sure that security is given the utmost importance for all mobile payment systems.

Lack of clear regulation should not be used by an organization as an excuse for not being proactive. There even exist possibilities of the information of the consumer getting misused by authorized users such as money laundering and risk of illegal use. Each organization involved in this modern method of transaction should have strong measures to protect the user data which is in their custody38. Also it is to be ensured that the transaction carried out should be by an authorized or a registered individual. Even the use of two-factor authentication can help in offering more effective identity protection for the consumers and higher identity assurance to the merchant. In the case of bank-centric NFC transactions, dynamic card verification values (CVVs) can be made use to ensure protection from transactions originating from unauthorized users or bogus mobile phones. NFC chip-enabled mobile phones support dynamic CVVs as compared to the static CVVs. therefore, if a bogus mobile phone is used, the transaction will not be processed further due to the wrong CVV being presented. Similarly, the same type of assurance to the consumer can be established at the merchant side as well. Also to ensure that legitimate POS or service providers interact with the mobile phone users for future transactions, techniques like secure sockets layer (SSL) can be made to use in the given scenario39.

Another important factor to consider is the data classification during the transmission and storage of the data at the various nodes. It is important the organizations that are dealing with financial data have the ability to identify the information which are personal and sensitive and should ensure that appropriate mechanisms are in place for its protection. In case if the mobile payment data is being used for marketing services, strict measures should be taken against the organizations that are following unfair business practices of revealing or manipulating personal data of the customer without his/her notice40. Organizations should also ensure that the third

37Ibid. 38Ibid. 39Ibid. 40Ibid.


23

parties with which they are interacting and sharing financial data of the consumer should have robust security measures in place to avoid data theft. Additionally, specific attention should also be given to the TSM, which acts as the entity that “personalizes” the TSM-compatible chip on the vendor supplied mobile devices. BMIS can also be used to help the organization address the context and protection of mobile payment data within the organization itself. The COBIT and Risk IT frameworks can be utilized to ensure effective risk control mitigation processes can be established for the use, collection and governance of mobile payment information not only within the organization, but also with the third party service providers41. Apart from this, the users should be well informed and educated about the risks regarding this modern mode of transaction. The device manufactures should not just collaborate with the payment industry for the development of platforms to ensure a secure environment for mobile transactions, but should include the feature of interoperability between different smartphone models. This is to ensure that if the user is replacing his/her device, then there are minimum hurdles involved in transferring the financial data as well as avoiding the situation of subscribing to too many financial applications for the respective mobile devices. In order to ensure the success of mobile based payments, it is pivotal that interoperability is given utmost importance. In addition to that, advance notification and know-how on proper operation of applications should be shared with the customers for them to enjoy easy and safe cashless transactions42.

Future Scope

Sarah Silbert in her article on “How mobile payments will grow in 2016” reflects on how mobile transaction are gradually shaping up as well as the future scope of this modern mode of payment. Proliferation of in-store terminals now cannot be a difficult as retailers now have a financial incentive to support EMV “chip and PIN” technology. When consumers will have access to opportunities to use more of the NFC- powered services, the awareness and usage of applications such as Apple Pay will expand automatically in the future. However, consumers need to have a clear value proposition even if the mobile payments are readily accepted at most retailers. Companies have started taking notice to these changes and are adding loyalty-minded features accordingly. Android Pay, for instance, is collaborating with Coca-Cola KO 0.91% to award user points for future purchases when consumers tap their smartphone to purchase Coke at any vending machine, equipped with that technology. Samsung Pay, another NFC based mobile app is providing support through loyalty cards and offering push coupons 41Ibid. 42Ibid.


24

directly to the users’ accounts. However, there are certain security concerns as well which can be a major inhibitor to mobile payment adoption. Apple has taken effective measures like extra layer of security offered through Touch ID in Apple Pay that can help in reassuring customers in terms of financial security and safety. Despite the hurdles such as fragmentation and point-of-sale compatibility exist, the process of change within the mobile based transaction is evident has an immense potential in the coming future43.

Rian Boden (2016) under “Global mobile payment markets to hit $620billion in 2016” highlights as to how consumers worldwide will be utilizing their mobile phones to spend a total of USD 620billion on all forms of mobile based transactions in the coming year. By 2017, the volume of mobile based payments will rise upto $780billion and is expected to become $1.08trillion by 2019.

Companies like Apple and Samsung are focusing their attention towards the regions where this technology has not been introduced but the market has the capacity of initiating an expansion of the very service. Countries like China are seen to be potential locations for upcoming market for mobile based payments. Chinese iPhone and Samsung phone users can enjoy the ability of making mobile payments provided that their devices are of the latest generation equipped with upgraded software. Hardware and software industries will have to play a significant role in developing the tools through which third-party payment platforms can enjoy the enormous business opportunity in the mobile payment market. This process will also lead to a rise in the biometric based technologies that will be integrated with the smartphones. It is expected that over 40% of the smartphones worldwide will have a fingerprint reading feature which can be an important security measure for mobile based transactions44.

According to the article, “Mobile Payments Will Triple in the US in 2016”, 2016 will be a significant year for the growth of technology. Taking the case of US, the rise in the number of people making use of mobile based transactions to pay for goods and services is a very positive indicator that this behavior will very soon witness a rise in the future. The total value of mobile based payment transactions in the US will witness a growth of 210% in 2016. Last year mobile payments accounted to total $8.71 billion in the US, with users spending an average of nearly $376 annually through their mobile phones as a payment method. However, by 2016, total mobile payment transactions is expected to reach $27.05 billion, with users spending an average of $721.47 annually. Total mobile payment sales will witness a faster growth due to an

43Silbert, S.(2015). How mobile payments will grow in 2016. Retrieved from http://fortune.com/2015/10/29/mobile-payments-grow-2016/ 44 Boden, R.(2016). Global mobile payment market to hit $620bn in 2016. Retrieved from http://www.nfcworld.com/2016/02/04/341939/global-mobile-payment-revenue-to-hit-620bn-in-2016/

http://fortune.com/2015/10/29/mobile-payments-grow-2016/

http://www.nfcworld.com/2016/02/04/341939/global-mobile-payment-revenue-to-hit-620bn-in-2016/


25

exponential rise in the number of mobile users which to an extent will complement the mobile based transaction usage45.

Merchants too will start adopting point-of-sale systems that can accept mobile payments. They too will, over a period of time make use of the incentives like promotions and loyalty programs that can help in attracting new users. Demographically, by 2017, 37.0% of the younger age group will successfully adopt the technology, compared with just 6.3% of the 65 and over group. However, strong security measures and transaction tracking systems will have to be place for mobile wallets in order to attract more users across all demographics in the long-term. There will be a rise in the medium-priced purchases to 63.9% by 2018, however low-priced transactions will witness a decline46.

The Oracle report (2014) also supports the above arguments and indicates that around 54% of all shoppers would prefer having touchscreen device in stores to explore and purchase items. This would also enable them to make use of their mobile devices to carry out the transactions. Around 80% would prefer to have mobile optimized product information when shopping. This would help in consumers having far greater clarity about the products and making better informed choices. Mobile based checkout systems will offer transactions far greater transparency and convenience. Tablets will be seen to replace the conventional POS systems in order to offer far more user-friendly and sleeker devices to the users for transactions47.

From all the above facts, it is clear that mobile based transaction market already exists and is gradually taking shape with more and more users adopting the technology. Mobile payment transaction values are predicted to increase to US$ 90 billion by 2017. In the coming future the success of mobile payments will be a powerful milestone for reshaping the overall global payment industry48.

45Silbert, S.(2015). How mobile payments will grow in 2016. Retrieved from http://fortune.com/2015/10/29/mobile-payments-grow-2016/ 46Ibid. 47Simplicity is the ultimate sophistication: The future of mobile payments (2014). Retrieved from http://www.oracle.com/us/industries/financial-services/future-mobile-payments-wp-2346929.pdf 48Ibid.




26

E-wallets

Introduction E-wallet refers to an electronic, internet based payment module which stores financial value as well as personal identity related information. It is a feature that allows an individual to make transactions over Internet. This includes online shopping and making payments using Smartphone or a computer. The wallet allows you to stock a number of credit, debit & prepaid cards and bank account numbers in a secured environment to facilitate payments. An E-wallet is a combination of both, software and information component. Security and Encryption of the personal data and the actual transaction is done by a customized software. These wallets are stored on the client site and are easily maintained. They are also fully compatible with most e-payment websites. An E-wallet is considered to be a component of the payment module, which includes the systems that enable various operations like credit card, debit card, smart card, money transfer or many other similar operations.

After the formation of the World Wide Web by Tim Berners-Lee in 1990, it opened for commercial use in 1991.

Fast food giant Pizza Hut, which is famous for manufacturing pizzas, was the first open a system for online payments. Then after the security of the payment systems were more intensified, more companies started coming up with the initiative. Amazon did not delay their entry into this and was soon followed by E-bay in the same year[1995.]

As E-commerce and Online shopping gained popularity, payment methods also had to be modified and simplified with a wider coverage of consumers. That was when payments also went digital.


27

The following flow chart tells us how we changed our approach towards handling money:

As the concept is ever evolving, a wide variety of names are used inter- changeably for such transactions such as e-money, digital money, micro-payments etc. Both, ‘terminology’ and ‘technology’ for operation of the wallet are continuously evolving.

An Important point to take from E-wallets is that they are composed of both digital wallet devices and digital wallet systems. Dunhill has launched a dedicated digital wallet device. Samsung Galaxy Series and the Google Nexus series running on Google's AOS and Apple Inc. Iphone6 and 6+ are exploring the smart phones with NFC digital wallet capability.

E-Wallet systems facilitate the widespread use of digital wallet transactions between various retail vendors in the form of mobile payments systems and digital wallet applications.

Over time the methods of making payments have changed and evolved to provide effective means for exchange of value. This has constructed the business world we have come to view as an essential part of our daily routine and lives.

The emergence of E-world and the rise of E-commerce have made us invent a new payment mechanism. Without monetary exchanges there can be no business and E-commerce wouldn't survive without proper and effective means of value exchange.

Most of the payment mechanisms that exist today have remained in one shape or another. However, a number of them haven't been able to transition themselves into the electronic world in their present state. The barriers and requirements of the electronic world enable both sophisticated and simplified ways of value exchange.

Cash Payments

Debit/Credit Cards

Internet Banking

Pre-paid Cards E-Wallets

Digital Currency


28

For example: The concept of Electronic Cheques is contradictory to our study. They are designed for the physical world as a physical instruction which is valid after being signed then delivered. Similarly, physical currency that represent value will not be able to move into the digital world.

From this we infer that a generic digitized payment instruction could/can replace many, if not all,of its physical counterparts. In future, we would just make payment. After authentication, the e-payment instruction will be executed. The concept of an E-Wallet is simply a familiar and logical way of providing the means of authentication and payment.


29

Types of E-wallets There are around 4 types of e-wallets which are accepted and recognized all around the globe.

1. Open Wallets 2. Semi-Open Wallets 3. Closed Wallets 4. Semi-Closed Wallets

Open Wallets These wallets can be used for purchasing goods and services, including financial transactions such as fund transfer at merchant locations or point-of-sale terminals that accept cards, and also cash withdrawals at automated teller machines or business correspondents. Only banks issue such wallets.

Semi-Open Wallets These can be used to purchase goods and avail services at any merchant outlet where these are accepted. Gift card is one such instrument. These, can’t be used to withdraw cash.

Closed Wallets A closed wallet is one that a business house issues to its customers for in-house goods and services only. These instruments do not provide the leverage of cash withdrawal or redemption.

Examples: Calling cards and gift cards. These have a limit to which they can be loaded with money and these too cannot be used to withdraw money.

Semi-Closed A semi-closed wallet can be used for goods and services, including financial transactions, at selected merchant locations or establishments. They get into a contract with the issuing company to accept these payment instruments. These wallets do not permit cash withdrawal or redemption by the holder as well.


30

Evolution of authentication and payment methods used in e-wallets The following table contains a brief evolution of the means of identification.

Methods of authentication

Description

Names Names have always been a convenient way for identification of individuals. An individual's name has been linked with reputation and it acted as a bond while entering transactions. When dealing with people outside of community using names became a problem. This led to uncertainties and duplication.

Seals Affixation of a seal to an envelope lend certainty that the contents were confidential and the information it carried was directly from the sender. Seals eliminated the duplication of name but were vulnerable to themselves being copied.

Fingerprints Fingerprints are unique identification for every individual. They are very difficult to be impersonated. They have widespread use in criminal cases and passport issuance. But, they are very complex to be compared and need to be checked individually.

Signature Signature are considered as an effective means of identification in today's world. They are unique and easily identifiable. They have certain drawbacks as well like they require physical presence, being an imprint on a paper it renders them unsuitable for use as online identification.

Username & password/Pin

Emails to E-banking they accept the Username and password. These passwords do not require physical presence at the point of sale. They too have certain drawbacks like remembering multiple passwords and its security is totally dependent on the individual.

Digital Certificate

These certificates were specially designed for online identification. They are effective in a closed system. These certificates are issued to a physical hardware device which makes them nontransferable to multiple Internet points of access. They are also difficult to maintain and taken care of as they need to be periodically followed up. The value of a digital certificate is determined by the credibility of the holder.

Biometric, Retinal Scan, Voice Recognition

Biological measurements are the new identification techniques. Fingerprint and retina scanning have already been deployed into various industries. Other biological measurements are currently not readily available and in excess use. These require expensive hardware devices to record and function which makes them unviable for


31

extensive usage.

In one of the initial surveys, where credibility and loyalty towards E-wallets was put to test, gave us the following results: 49

49 Mobile Wallet Reality Check: How Will You Stay Top of Wallet? [An NTT DATA Consulting study finds banks at risk of losing market share as new mobile wallet competitors emerge (July 2012)]

65%

57% 55%

47% 46%

30%

21%

10%

0%

10%

20%

30%

40%

50%

60%

70%

Paymentchoice

ManagingReceipts

Incentives Search andShop

Ratings andreviews

Places to go Create andshare Wish

lists

Sharingpurchases

• 65% of respondents rated the payment making option as the most valued E-wallet service. • 57% of respondents chose E-wallets for managing their Receipts • 55% of respondents used E-wallets for its real-time Incentive disbursement. • 47% of respondents opted for Searching and shopping via E-wallets. • 46% of respondents gave Ratings and Reviews through E-wallets. • 30% of respondents chose E-wallets for selecting which outlet to visit. • 21% of the respondents created and shared their wish-lists on E-wallets. • 10% of respondents used E-wallets for splitting expenses to make purchases.


32

Operational Apparatus

I. Loading of cash can be done either by transferring funds online through the bank accounts or by handing out cash at dedicated kiosks or through door to door collection.

II. The charges for either registering with a service provider or transferring money from a bank account are levied to the user.

III. E-wallets have certain attractions to accompany them with Cash back and redeemable reward points topping the list. A Consumer readily opts for online purchase because he gets a pre decided cash back on his transactions. Sometimes they earn reward points which can be used for purchasing as well.

• Online • Handing out Cash I. Load Cash

• Convenience Charges • Registration Charges II. Pay Charges

• Cash Back • Reward Points III. Attractions


33

Benefits of E-Wallets

Flexibility. a. Transfer value by phone. b. pay person to person c. For low and high values d. Multi-Currency capability e. Suitable for all age groups

Security. a. Spend as per your capacity b. Always aware of your balance c. Load value from home d. Lock your card or wallet e. Keep track of your spending

Reduces banking costs. a. No KYC issues until you cross INR10000 b. Seamless transfers without additional costs c. Top-up through credit cards.

Facilitates E-Commerce a. Easy payments b. Pre-stored Information c. Discounts d. Cash Backs

Boosts Economy a. History of all Debits and credits b. Collaboration with bank accounts provide virtual tracking of money flow. c. Taxes included in price of product or services d. Every penny accounted for e. Comfort encourages more purchase


34

The issues that are faced by customers due to different payment options, which puts E-wallets on the podium:

58%

30%

13%

10%

0% 10% 20% 30% 40% 50% 60% 70%

Tracking Offers

Tracking payment dates

Too many cards

Not always carrying cards


35

The Future of E-wallets The E-wallet is on the track of becoming a personalized portal for every Individual. The following are some of the benefits Individuals can expect from their E-wallet.

Online Shopping The E-wallet facilitates buying from smart phones and PDAs. Issues of user input via keypad was considered as a barrier to m-commerce. The E-wallet minimizes the number of key clicks required to shop from these devices by automating the online purchasing process.

Price Comparison Shopping The E-wallet facilitates comparison shopping at all points. It can be used for both online and offline purchases. It is now possible for a consumer to compare services and prices on a mobile device while

shopping at a physical location. This enables price transparency and consumer control.

Online Shopping

Price comparison

Shopping

Bill payments

Loyalty addition

Personal Information

access

Personal organizer

Wireless Purchasing

Pre-emptive Purchasing

D2D/P2P payments

E-Wallets


36

Bill Payments The E-wallet has the capability to make bill payments on behalf of the user. This includes payment scheduling for electronic bills and invoices and receiving bills

Loyalty Rewards The E-wallets provide real time points tracking, accumulated over time by shopping, recharges etc.

Personal Information Access The Electronic wallet has the capacity to hold all your personal information at a single registered account. It can include medical, motor vehicle, Insurance, Investment reporting, mortgage and superannuation. It will act as a personal financial portal. This information aggregation can also extend to online gaming and auction monitoring.

Virtual Personal Organizer The E-wallet has the capacity to store user's Calendar, Contacts, to-do lists and tasks allowing it to be accessed on any system for updation or changes.

Wireless purchasing at physical stores The wallet would allow purchasing at stores when the wallet is supported by Bluetooth or Infra-Red device. The wallet will have the capability of retrieving the User's credit card number from the pre-stored account details and then transmit the credit card number to the point of purchase.

Pre-emptive Buying The Wallet while allowing purchases also records your transactional history. It will analyze your

purchasing patterns and remind you itself about making a purchase.

D2D/P2P Payments Device to Device and Person to Person money transfer will change how the world looks today at money exchange. Once installed on a device it will be possible to transfer payments from one person to person without much hassle.


37

Survey Analysis The survey was conducted to answer the following questions:

1. What is the impact of age, education and income on the tendency of making payments using mobilewallets or E-wallets?

2. What is the classification of Mobile wallets based on application, mode of payment, age group and income of the consumer?

3. How much trust has the e-commerce industry,leveraging Mobile payments, instilled in its user base in the first quarter of year 2016?

The survey was conducted to understand the consumer behaviour towards Mobile Payments based on various factors. The survey was conducted on an online platform, Survey Monkey. The results were collected via. Emails invitation, URLs shared on social media, survey links shared on messages and direct invitation on the survey portal.

The survey was based on convenience sampling, which is a nonprobability sampling. The participants were chosen due to easy accessibility, availability at a given time and the will to participate. With a sample size of 200, the data contributed to a better understanding of the acceptability and feasibility of Mobile Payments.

Sampling : Convenience Sample Size: 200 Results acquired through: Emails, social media, messages, portal invites Age groups: Variable Geographies: Variable


38

Survey Results

Question 1.

23,7%

59,4%

10,1%

2,4%

2,9%

1,4%

0,0%

What is your age?

18 to 24

25 to 34

35 to 44

45 to 54

55 to 64

65 to 74

75 or older

• 59.5% of the respondents were from the 25-34 age bracket.

• 1.4% of the respondents were from the 65-74 age bracket.


39

Question 2.

Question 3.

Question 4.

0,0%

1,9%

8,2% 1,4%

19,8%

23,7%

43,0%

1,9% What is your highest level of

education? Less than high schooldegree

High school degree orequivalent

Some college but nodegree

Associate degree

Bachelor degree

59,0% 18,5%

8,7%

5,6% 1,5%

1,5% 1,5% 0,5%

3,1%

What is your approximate average annual income?

$0-$24,999

$25,000-$49,999

$50,000-$74,999

$75,000-$99,999

$100,000-$124,999

$125,000-$149,999

$150,000-$174,999

$175,000-$199,999

$200,000 and up

• 43% of the respondents were Post graduates. Only

• 1.4% of the respondents had Associate degrees.

• 59% of the respondents had average annual income less than $24,999.

• Only 0.5% of the respondents had average annual income between $175,000-$199,999.


40

87,5%

12,5%

Have you ever purchased goods & services using your

Mobile?

Yes

No

• 87.5% of the respondents purchased goods & services using their mobiles.


41

Question 5.

Question 6.

46,2%

53,8%

How do you prefer to pay?

Cash on Delivery

Mobile payment[Credit card, Debitcard, Net banking, e-wallets etc.]

38,7% 34,9%

42,5%

13,2% 7,5%

0,0%5,0%

10,0%15,0%20,0%25,0%30,0%35,0%40,0%45,0%50,0%

Lack of trust Uncertainity Fear of not receivingwhat you ordered

Lack of awarenessabout mobile

payments

Other (please specify)

If your answer to Question 5 was 'Cash on Delivery', please select the reason for not choosing Mobile payments. (Please

select all that apply.)

• 53.8% of the respondents used mobile payments as the option to pay for good & services purchased using their mobiles.

• It is significant to note that a huge 46.2% of the respondents used cash on delivery to make these payments.

• The most prominent reason for NOT choosing Mobile payments was the ‘fear of not receiving what you ordered’ [42.5%], followed by ‘lack of trust’ [38.7%].

• Around 13.2% preferred cash on delivery dues to lack of awareness about mobile payments. [Note: respondents chose multiple reasons for not choosing Mobile payments.]


42

Question 7.

76,7% 71,9%

62,3%

6,8%

42,5%

67,8%

52,7% 52,7% 54,8%

4,8% 2,1% 0,0%

10,0%

20,0%

30,0%

40,0%

50,0%

60,0%

70,0%

80,0%

90,0%

Mak

e on

line

purc

hase

(e.g

.Am

azon

, Alib

aba,

Sna

pdea

l)

Tran

sfer

Mon

ey (e

.g. N

et b

anki

ng,

e-W

alle

t tra

nsfe

r)

Pay

for a

ride

-sha

ring

appl

icat

ion

(e.g

. Lyf

t, U

ber,

Side

car)

Book

ings

hot

els

Book

ing

Trai

n tic

kets

Oth

er (p

leas

e sp

ecify

)

If your answer to Question 5 was 'Mobile Payments', please select the products & services that you have purchased using

Mobile Payments. (Please select all that apply.)

• Most of the respondents use Mobile payments for making online purchases from e-commerce website like Amazon, Alibaba etc.

• This majority is closely followed by paying bills, booking movie tickets & making money remittances.


43

Question 8.

13,8%

26,1%

39,4%

10,8%

9,9%

How often do you make online purchase using Mobile payments?

Almost everyday

Once a week

Once a month

Once yearly

Not at all. I do not trust onlinepayments.

• 39.4% of the respondents make a Mobile payment at least once every month. • 9.9% of the respondents do not trust Mobile payments.


44

Question 9.

ExtremelyConvenient Very Convenient Slightly

ConvenientModeratelyConvenient

LeastConvenient

Credit cards 47 50 41 29 41Debit cards 55 80 55 36 15Cash 83 44 48 34 52Net Banking 51 42 45 45 34E-wallets 27 37 36 51 49

0

50

100

150

200

250

300

Rank the following payment methods in ascending order from the MOST convenient to the LEAST convenient.

E-wallets Net Banking Cash Debit cards Credit cards

• In the decreasing order of preference, the respondents chose Cash > Debit cards > Net banking > Credit cards > E-wallets as the mode of making payments.

• E-wallets is a trend that is still in its infancy and is catching up with the traditional modes of payments. The number is smaller than the number for Cash payers, but has significantly increased from the time of its inception, which points towards a positive response towards this mode.


45

Question 10.

7,8%

24,9%

42,9%

14,1%

10,2%

How confident are you that your payment information is kept secure when buying products

using Mobile Payments?

Extremely confident

Very confident

Moderately confident

Slightly confident

Not at all confident

• Only 7.8% of the respondents were ‘extremely confident’ that their information is kept secure while buying products using Mobile payments.

• 42.9% of the respondents were only moderately confident about it. • 10.2% of the respondents were not confident at all about their information being kept secure.


46

Question 11.

29,4%

28,9%

24,0%

12,3%

5,4%

What are the issues you face while making mobile payments?

Slow internet

Security issues

Mobile app glitches

High convenience fee


• 29.4% of the respondents consider ‘slow internet’ to be the major issue that they face while making Mobile payments followed by ‘security issues’ & ‘mobile app glitches.’

• Only 12.3% of the respondents consider ‘high convenience fee’ as a constraint to using Mobile payments.


47

Inference, Findings&Conclusions The inference that we derive from this survey, which was diverse in nature and was spread across various age groups, income groups & educational backgrounds, are as follows:

We found that Mobile payments are a very popular trend amongst the Millennial generation [25-34 years of age].

We also see that education also influence the ease with which people try new technologies. The survey clearly shows that 43% of 208 respondents were Post graduates of which 87.5% of the respondents purchased goods & services using their mobiles. This indicated that education influences the usage of Mobile payments.

The survey reveals that a very small number of people use E-wallets as the mode of making payments. The possible reason for this can be that, E-wallet is a trend that is still in its infancy and is catching up with the traditional modes of payments. The number is smaller than the number for Cash payers, but has significantly increased from the time of its inception, which points towards a positive response towards this mode.

The survey reveals that there is still a major lack of confidence that has been created in the psyche of the consumer. Only 7.8% of the 208 respondents were ‘extremely confident’ that their information is kept secure while buying products using Mobile payments, whereas, 42.9% of the respondents were only moderately confident about it. 10.2% of the respondents were not confident at all about their information being kept secure.

The survey highlights other aspects that are holding back the culture of Mobile payments. Some of the prominent reasons include slow internet, security issues, mobile app glitches, high convenience fee among various others. These issues lead to bad user experience and ultimately causes loss of potential consumer. Approximately 30% of the respondents consider ‘slow internet’ to be the major issue that they face while making Mobile payments followed by ‘security issues’ & ‘mobile app glitches.’ Around 13% of the respondents consider ‘high convenience fee’ as a constraint to using Mobile payments.

Growth in the number of users of smartphones and mobile internet users are the major drivers of growth in the global mobile payment industry.

The major players operating in the mobile payment industry include Amex, PayPal, Google, Visa, Square, LevelUp, Apple, MasterCard, BlackBerry and Samsung to name a few.


48

Research Summary The research reveals that Mobile payments led the e-commerce payment market in the first quarter of 2016, with a market share of 53.8%. The report also highlights that online purchase segment dominated the mobile payment market with 76.7% market share; Cash payments dominated the global payment market in terms of convenience, with 82% market share; and 25-34 age group dominated the global mobile payment market with 59.4% market share in the first quarter of 2016. All the dominant aspects highlighted in this report are expected to retain their dominance during the second & third quarter of 2016.


49

Appendix 1

Survey questionnaire

1. What is your age?

18 to 24

25 to 34

35 to 44

45 to 54

55 to 64

65 to 74

75 or older 2. What is your highest level of education?

Less than high school degree

High school degree or equivalent

Some college but no degree

Associate degree

Bachelor degree

Graduate degree

Post Graduate Degree

Doctorate 3. What is your approximate average annual income?

$0-$24,999

$25,000-$49,999

$50,000-$74,999

$75,000-$99,999

$100,000-$124,999


50

$125,000-$149,999

$150,000-$174,999

$175,000-$199,999

$200,000 and up 4. Have you ever purchased goods & services using your Mobile?

Yes

No *5. How do you prefer to pay?

Cash on Delivery

Mobile payment [Credit card, Debit card, Net banking, e-wallets etc.] 6. If your answer to Question 5 was 'Cash on Delivery', please select the reason for not choosing Mobile payments. (Please select all that apply.)

Lack of trust

Uncertainty

Fear of not receiving what you ordered

Lack of awareness about mobile payments

Other (please specify) 7. If your answer to Question 5 was 'Mobile Payments', please select the products & services that you have purchased using Mobile Payments. (Please select all that apply.)

Make online purchase (e.g. Amazon, Alibaba, Snapdeal)

Pay bills (e.g. Mobile, Utility, Rent)

Transfer Money (e.g. Net banking, e-Wallet transfer)

Split bill

Pay for a ride-sharing application (e.g. Lyft, Uber, Sidecar)

Booking movie tickets


51

Bookings hotels

Booking Flights

Booking Train tickets

I do not do any of the above activities and/or do not own a mobile device

Other (please specify) 8. How often do you make online purchase using Mobile payments?

Almost everyday

Once a week

Once a month

Once yearly

Never. I do not trust online payments. 9. Rank the following payment methods in ascending order from the MOST convenient to the LEAST convenient.

Credit cards Debit cards Cash Net Banking

Mobile payment

Extremely Convenient

Very Convenient

Slightly Convenient

Moderately Convenient

Least Convenient 10. How confident are you that your payment information is kept secure when buying products using Mobile Payments?

Extremely confident

Very confident


Slightly confident


52

Not at all confident 11. What are the issues you face while making mobile payments?

Slow internet

Security issues

Mobile app glitches


Other (please specify) *12. If you could change one thing about Mobile Payments, what would it be?


53

Appendix 2

Survey Summary

Re sp o nse Pe rce nt

Re sp o nse Co unt

23.7% 4959.4% 12310.1% 212.4% 52.9% 61.4% 30.0% 0

2071

35 to 44

a nswe re d q ue stio n

Answe r Op tio ns

55 to 64

25 to 34

75 or older

Wha t is yo ur a g e ?

45 to 54

sk ip p e d q ue stio n

18 to 24

65 to 74


Re sp o nse Co unt

0.0% 01.9% 48.2% 171.4% 319.8% 4123.7% 4943.0% 891.9% 4

2071

Some college but no degree

Doctorate

Answe r Op tio ns

Bachelor degree


High school degree or equivalent

Post Graduate Degree

Wha t is yo ur hig he st le ve l o f e d uca tio n?

Associate degree


Less than high school degree

Graduate degree


Re sp o nse Co unt

59.0% 11518.5% 368.7% 175.6% 111.5% 31.5% 31.5% 30.5% 13.1% 6

19513sk ip p e d q ue stio n

$50,000-$74,999

$175,000-$199,999

Answe r Op tio ns

$100,000-$124,999


$25,000-$49,999

$150,000-$174,999

Wha t is yo ur a p p ro xima te a ve ra g e a nnua l inco me ?

$75,000-$99,999

$200,000 and up

$0-$24,999

$125,000-$149,999


54


Re sp o nse Co unt

87.5% 18212.5% 26


Ha ve yo u e ve r p urcha se d g o o d s & se rv ice s us ing yo ur Mo b ile ?

Answe r Op tio ns

YesNo



Re sp o nse Co unt

46.2% 9653.8% 112


Ho w d o yo u p re fe r to p a y?

Answe r Op tio ns

Cash on DeliveryMobile payment [Credit card, Debit card, Net banking,



Re sp o nse Co unt

38.7% 4134.9% 3742.5% 4513.2% 147.5% 8


If yo ur a nswe r to Que stio n 5 wa s 'Ca sh o n De live ry ' , p le a se se le c t the re a so n fo r no t cho o s ing Mo b ile p a yme nts . (Ple a se se le c t a ll tha t a p p ly .)

Lack of awareness about mobile payments

Lack of trust


Fear of not receiving what you ordered

Answe r Op tio ns


Uncertainity


Re sp o nse Co unt

76.7% 11271.9% 10562.3% 916.8% 1042.5% 6267.8% 9952.7% 7752.7% 7754.8% 804.8% 72.1% 3

14662

Transfer Money (e.g. Net banking, e-Wallet transfer)

Booking Flights


Answe r Op tio ns

Pay for a ride-sharing application (e.g. Lyft, Uber,

I do not do any of the above activities and/or do not

Pay bills (e.g. Mobile, Utility, Rent)

Bookings hotels


If yo ur a nswe r to Que stio n 5 wa s 'Mo b ile Pa yme nts ' , p le a se se le c t the p ro d ucts & se rv ice s tha t yo u ha ve p urcha se d us ing Mo b ile Pa yme nts .

Split bill

Booking Train tickets

Make online purchase (e.g. Amazon, Alibaba,

Booking movie tickets



55


Re sp o nse Co unt

13.8% 2826.1% 5339.4% 8010.8% 229.9% 20


Ho w o fte n d o yo u ma ke o nline p urcha se us ing Mo b ile p a yme nts?

Once yearly

Almost everyday


Once a month

Answe r Op tio ns

Not at all. I do not trust online payments.

Once a week

Cre d it ca rd s De b it ca rd s Ca sh Ne t Ba nk ingMo b ile

p a yme ntRe sp o nse

Co unt

46 53 82 50 26 19949 79 42 41 36 19640 54 47 43 35 18928 35 33 44 49 17139 14 51 33 48 173


Ra nk the fo llo wing p a yme nt me tho d s in a sce nd ing o rd e r fro m the MOST co nve nie nt to the LEAST co nve nie nt.

Moderately Convenient

Extremely Convenient


Slightly Convenient

Answe r Op tio ns

Least Convenient

Very Convenient


Re sp o nse Co unt

7.8% 1624.9% 5142.9% 8814.1% 2910.2% 21


Ho w co nfid e nt a re yo u tha t yo ur p a yme nt info rma tio n is ke p t se cure whe n b uy ing p ro d ucts us ing Mo b ile Pa yme nts?

Slightly confident

Extremely confident



Answe r Op tio ns

Not at all confident

Very confident


56


Re sp o nse Co unt

29.4% 6028.9% 5924.0% 4912.3% 255.4% 11


Wha t a re the issue s yo u fa ce while ma k ing mo b ile p a yme nts?


Slow internet


Mobile app glitches

Answe r Op tio ns


Security issues

Re sp o nse Co unt

208208

0

If yo u co uld cha ng e o ne thing a b o ut Mo b ile Pa yme nts , wha t wo uld it b e ?

Answe r Op tio ns

a nswe re d q ue stio nsk ip p e d q ue stio n


57

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http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.103.5202&rep=rep1&type=pdf

http://www.emarketer.com/article.aspx?R=1013147&RewroteTitle=1



http://www.paymentscardsandmobile.com/research/










http://the/

https://www.about-payments.com/knowledge-base/

http://www.livemint.com/Industry/36uXHTf6QUJdr2dEpen8yJ/Are-

http://www.financialexpress.com/article/personal-finance/e-wallets-offer-a-secure-and-

mba thesis- the growth & future of mobile payments

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