Mobile Payments

Posted by Winnie Melda on October 5th, 2018

Payment has been evolving from the early usage of butter trade in the ancient times; the physical exchange and use of notes and coins moved to the writing checks, and to the transferring of funds through the use of payment card details over a mobile device or via the Internet. This evolution has involved a shift from the physical transference of tangible tokens of value to an exchange of information between parties. The banking industry has been the service industry that has facilitated the evolving of these payments, and it is true that the mobile payments stand to be the only future technique of undertaking payments for goods and services. The money transfers using the mobile device have evolved with the existence of the e-commerce. The e-commerce is responsible for digitizing the entire payment process. The e-commerce was accomplished through the sending of the payment details over an open network with the limitation of the physical contact/ interaction between the client and the merchant. The process was limited to the location that it majored with the use of established systems. The mobile payments come in, and it is on a dramatic adoption by many companies, firms globally because the technique is not limited to location or the credit cards. A person stands to undertake a transaction at its convenience anywhere, anytime. I purport to support the fact that mobile payments are taking in and over the previous e-banking systems.

The global is enjoying a high-speed mobile data networks development that has resulted in the creation of the new channel for commerce. There are the introductions of more sophisticated mobile devices that are promising in supporting and enabling the virtual exchange of payment information referred to as proximity payments. Consumers and merchants are enjoying benefits of the virtual payments, and this provides a ground of them improving the technology to have it well established. Therefore, I ought to describe the mobile payments in the below-described headings to have a good understanding of the mobile payments as the virtual payment technique.

Mobile Payment Definition

Mobile payment also referred to as the mobile money transfer describes the mode of paying for different services, goods, and products using a mobile device such as the mobile phones, tablets, the personal digital assistant (PDA), and any other mobile devices. Thus, this money payment describes the process of two or more defined and well-related parties exchanging the financial values using a mobile device within a well-established platform for the purpose of acquiring a service or goods. The technology of mobile payments is currently described as the next biggest innovation that will make sure that the e-commerce is taken to another level with the efforts of unleashing potentials of the mobile business.

Use of Mobile Payments in Banking

The banking industry has struggled with the mechanism of ensuring that they keep a close communication with their customers. This has been the aim to make sure that the clients are retained with the delivery of services at their easy. Tech giants have piloted the mobile payment solutions that most banks have just sat a side wait to for the determination of the best solution that will come to gain the traction. We can say that relative fraction of the bank customers has used the new mobile payment technologies with the understanding of the related issues with mobile payments. However, the mobile payments have gained their usage within the banking industry, and most of the clients are heavily depending on the mobile payment services.

Most of the banking industry leaders have viewed the technology of mobile payments as a long-term trend that has made most of the bank clients to have the highest expectation of value and the convenience of the technology. The way the bank clients are impressed and embraced with the online banking and mobile banking, they have the expectation that the banking industry will come up with the most reliable and efficient mobile payment solution. The banking industry has outlined that their consumers are getting more and more comfortable with the use of the mobile devices in undertaking their financial transactions. This comes with the fact that there is the adoption of the new technologies in the industry, and the process is speeding up. However, there are some banks that are still waiting to have their investments in the mobile payments (Ahmad, Bertrand, &Toit, 2014).

The mobile payments solution has been adopted in the banks with the aim of improving the consumer interactivity with the bank services and their finances. The mobile payment solutions have the value to the customers who are in the right position to manage their money and easily reach to their financial goals. These mobile payments apps applied in the banks have facilitated the customers to view on their bank account balances after they have made a transaction say paying for shopping. Subsequently, the technology gets to integrate the transition data into well developed and descriptive monthly budgets and statement that gets the bank clients to save easily and get to reach their anticipated long-term financial goals.

Different types of Mobile Payments

Mobile payments modes come in different ways to satisfy the needs of the consumers. The categorization of the mobile payment modes has not yet been established but based on the understanding of the technology it comes to outline the mobile wallets and the online mobile related transactions (Roberts, 2013).

SMS Payments

The SMS Payments is the current and most adopted model of mobile payments that has been adopted by many to use the mobile phones purchase good and pay for some services. The technique also enables the transfer of money from person to person. The only requirements are that the user needs the mobile phone and the sms capability to pay for the goods or services and do other transactions. The SMS payments show the essence of growth and retention within the market.

The technique can be categorized under the use of proprietary apps. The Proprietary apps are regarded as mobile payment where a given company designs the payment app that will get sued for specific services and activities. The star bucks can be the sample that designed the order and paid feature mobile app that can get the coffee lovers to order and pay for the goods ahead of time. The SMS payments have been efficient in most developing countries when it comes to money transfer, think of the Kenyan money transfer, M-Pesa, Ghanaian, Gloh Money.

NFC Payments

The Near Field Communication (NFC) payments have grown dramatically by the fact that the technique enables the direct communication between the NFC phones.  During the payment, the NFC phone communicates with the NFC-enabled points to make the transaction under the use of using radio frequency identification (RFID) technology.  The mobile phones must not touch the point of sale but be fairly close like four inches of each other. The mobile wallets adopt the Near Field Communication (NFC) payments such that the consumers securely keep the credit card information on an app creating a virtual credit card. The payment is facilitated with the simple tap enabled on the terminals. The mobile wallet app may include the Google Wallet or the Samsung Pay.

 WAP Payments

WAP Payments describes the use of the Wireless Application Protocol (WAP) feature on the mobile phone (Smartphone). The module will enable the connection to the internet and then in the application of the online payment method such as the PayPal, Google Wallet, Yahoo Wallet or just keying in the credit card details; a financial transaction is undertaken. At the time, some mobile network operators get their legitimate users to make payments for the WAP Payments directly from a mobile phone bill with the adoption of the standard SMS payments.  The type of mobile payments works very well with the SMS payment solutions.

Mobile Payments initiation and operations using Mobile devices

Below is the description of the mobile payments done by using a mobile number. The customer who wants to make the transaction chooses to make the payment via the mobile money for the goods and services from any participating merchant. The participating merchant bills the customer via the SMS. The merchant requests for the payment with the customer's mobile number. The Mobile Money system sends an SMS containing the Bill Reference Number to customer prompting the customer to make a reply with their Security PIN make the payment approval.

The Customer authorizes the actual payment by replying the SMS that contains the Bill Reference Number and the Security Pin. The registered Mobile Money authenticates the customer's security credentials and requests for the bank approval on the transaction. The approval of the transaction goes through the authentication and authorization process.

The authentication of the transaction is done through the following process. The terminal sends the unique merchant’s identification number, along with card information, and transaction amount that is to get debited from the account to the card processor. The card processor system will read the information and sends the authorization request to the mobile network provider who coordinates to the specific bank. The funds are issuing bank then checks for fraud and verifies the request. The merchant acquirer will receive a response and then relays the message to the merchant (Geuss, 2014).

Upon receipt of the bank's confirmation to the customer's debit mobile credit account and mobile Debit account, the Mobile Money will send a notification SMS of the payment. The notification contains the details of the merchant, the customer, and the transaction information.

Benefits of Mobile Payments and Banking

The Mobile Payment techniques are outlined with some benefits to the Consumers and the merchants respectively. The mobile payment technology does make the payment process for goods and services easier and quite less complicated. There is no essence of carrying around the change if the cash monies were used. The credit cards are not used and reduce the risk that entails loosing of eh cards instead the customers pay everything with the one mobile device such as the Smartphone (Knoll, 2012).

Mobile payments are regarded as the secure way of making payments. The technique excludes the stealing of the credit card information since no information is stored directly in the Smartphone. The fraudsters have no space for extracting the customer credit card details even if they steal the mobile device. Another benefit that customers are enjoying is that making payments using the mobile devices is just cool. The action can get done at anywhere, anytime efficiently and without any inconvenience.

Mobile payment techniques also offer some sorted benefits to the merchants such that the shop owners incurs lower costs of using a barcode scanner, mobile card reader than having a direct credit card terminal link from the bank that gets the merchants charged a monthly fee. Also, the measure of getting to offer mobile payments options to the consumers both the online and offline does make the purchasing processes easier.

The banking industry has benefited everyone as it enables persons to pay for services, goods, able to transfer money and also providing employment opportunities to many. The industry is among the biggest export industry. Otherwise, the mobile and banking have provided the consumers with the best ways of managing their funds.

Drawbacks of Mobile Payments and Banking

Mobile payments in on improvement and the use of the technology are growing globally. However, the technique is related with some challenges. It is obvious that the companies that adopt the mechanism of mobile payment will require having a large client base. Though, it is upon companies and the clients to have a consideration of the potential detrimental impacts of making payments using mobile devices.

Mobile payments get the consumers to undertake the payment transactions at their convenience based on a secured mobile device platform. However, the technology of mobile payments is related with the challenges of security and privacy. Upon losing the mobile device then, it means that the previous transactions will get exposed as most of the security and privacy apps integrated into the phones are not reliable.  If the client stores the card details within the mobile device, then there is the high possibility of suffering the credit card fraud and the identity theft.

Companies are facing the competitive disadvantage if they fail to have the consideration of the mobile payments. At the same time, the companies should be considered that the introduction of new technologies comes with the new security related vulnerabilities. Some merchants fail to address the upcoming security vulnerabilities thus getting the technology of mobile payments unreliable.

The heavy dependency on these mobile devices will lead to increase in the transaction volumes which are associated with performance bottlenecks. Performance challenge will degrade the customer experience and thus get the life to be not enjoyable. Also, the securing of the technology is alarmed with huge costs which are challenging to some merchants. Lastly, the attackers can access the data and misuse the information that will lead to a painful disclosure.

Rise of Mobile Payments in the United States

The mobile payments in the US are on the rise such that it is anticipated to reach 2 billion payment in volume by 2019 as according to the report from the Forrester research firm which notes that the current transfer is at billion currently. The interested early companies of PayPal, Google, AT&T, Verifone and Visa have tried to design and create their versions of the mobile wallet. The companies have indicated that there is a shift to mobile commerce which is growing faster. There is the use of Smartphone, which has facilitated the use of the mobile payments in the US.

Global growth and spread of Mobile Payments

The fast spread of mobile devices such as the Smartphone and tablets globally has lead growth in mobile commerce. The global mobile e-commerce spending in the quarter of 2015 amounted to 11.4 billion US dollars. The easy access to the mobile devices, the mobile apps and the plentiful of the online market leaders such as the eBay and Amazon have been the facilitators to all the happenings in the mobile payment technology.


Mobile payments have been an improvement on the early e-commerce and e-banking that has got the consumers and the merchants with enormous benefits. The increase in the usage of the mobile payments has got some pressure to the banking industry; banks, card companies and the mobile operators. The parties have no other option but to support the growth and the deployment of the technique by providing a robust security and interoperability. The factors of security, privacy, interoperability, global acceptance and the ease of use have been addressed, and this has provided a good confirmation that the mobile payments technique is the only future of the banks. Mobile payment technique has been seen as a very promising service in its early stages of development. Despite the threatening factors to the future horizon of the technique of making payments and transferring money, the adoption is dramatic, and the benefits are enormous, and many are investing. The US is applying the technique to the different field alongside other big nations such as China. Netherlands has proved how it is moving towards the technology without forgetting the developing nations such as Kenya, and others. It is the approval and my agreement that, mobile payments will be the future mode of money transaction technique applied within the banks globally.


Ahmad, K., Bertrand, S. &Toit, G. D. (2014). Mobile Payments: The Next Step in a Bank's Digital Journey 

eMarketer, (2015). Mobile Payments Will Triple in the US in 2016.  Google Wallet actually work. 

Knoll, M. (2012). Mobile Payment Overview: Definition, Trends And Payment Systems.

Roberts, J. (2013). Different Types of Mobile Payments.

Statista, (2016). Worldwide mobile payment transaction volume 20105-2019.

Sherry Roberts is the author of this paper. A senior editor at Melda Research in customized research paper if you need a similar paper you can place your order for medicine essay writing.

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Winnie Melda

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Winnie Melda
Joined: December 7th, 2017
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