It is not only China that is ahead of the U.S. in relation to the proportion of mobile payment transactions, other countries are more advanced in terms of meeting consumer expectations. This leaves a vacuum for innovative companies to fill. One such company is Omnyway, a provider of mobile shopping and payments technology. The company wants to disrupt the dominant methods of card and cash payments.
Digital Journal: Please can you explain the advantages of mobile payments?
Amitaabh Malhotra: “’Mobile payments’ covers a broad spectrum of mobile commerce transactions, ranging from traditional buying online, using a mobile phone, to in-store payments with a mobile device to person-to-person payments. There are various technologies at play that make all of this a reality. A lot of people confuse mobile payments for the in-store, near-field based transactions only, but do not realize that every time they pay for an Uber, buy from Amazon with 1-click, or Venmo funds to their friend, they have participated in mobile payment of one form or the other.
“The advantages depend predominantly on the context in which each of the mobile payment types are used. In the example of Uber-type mobile payments, the actual payment transaction happens automatically, leading to a seamless taxi ride or ride-hailing experience. Essentially, a rider just interacts with their app to hail a cab, get to their destination and ultimately settle their fare with a card they have on file. The overall experience is so much better than the awkward exchange of cash at the end of a ride, or the endless wait to get a credit card swiped by the cab driver.”
Drawing on other examples, Malhotra expands:
“Similarly, the classic Starbucks experience has expanded; customers are able to pay for their coffee and get loyalty points with just a quick scan of a barcode on their mobile device. But what’s even better, they can also use their phones to order and pay ahead of time and have their coffee of choice waiting for them by the time they show up at the Starbucks store.
“Mobile payments define a completely new user experience, outside the common practices of swiping a card at the point of sale or paying by cash. Since the mobile device is a combination of a connected service, computing device and identification/authorization system, using it for transactional commerce just removes the physical barriers that have restricted payment innovations in the past.”
DJ: Is there a certain demographic this form of payments appeals to?
Malhotra: “Broadly speaking, mobile payments cater to multiple demographics, dependent on the particular implementation and use case. Most folks in the industry automatically jump to the conclusion that mobile payments are something for millennials only. Granted, the younger generation is coming into a world where paying with cash and plastic is rapidly going the way of the DoDo, but at the same time, there are worldwide examples of mobile payments having a broader appeal across multiple demographics.
“In Africa, M-Pesa has become the default payment method for most of the continent. Why? It’s safer to transact with a mobile device than to carry cash. And credit card acceptance is almost non-existent in that parts of Africa. Similarly, Alipay and WeChatPay have become some of the most popular methods of payment in China for all day-to-day spending. These mobile options are used to buy groceries, pay for cabs, and even send money to kids and grandkids using digital red envelopes.”
Malhotra: “In the case of Starbucks, Uber and Amazon 1-click, the payment method has almost uniform adoption across demographics in the U.S. Although mobile payment methods can be created to appeal to a specific demographic, like Venmo for a younger audience, even these quickly become adopted across other demographics. The most successful mobile payment schemes are part of a broader merchant experience being offered to consumers.”
DJ: Which countries are leading the way with this technology? What are the drivers for this?
Malhotra: “China’s use of WeChatPay and AliPay is definitely considered groundbreaking. They are leading the way, not only in mobile payments, but also with their creation of an ecosystem of service centered around a mobile-first and mobile-only lifestyle.
“Another market with a very successful implementation is Japan and the Suica NFC payment system used for transit and transit center merchants. M-Pesa in Kenya has shown what a carrier billed, peer-2-peer mobile payment system can become. We are watching developments in India with PayTM, Bharat QR, Bheem and others. Each one is solving issues for an economy trying to grapple with demonetization and the rapid adoption of digital currencies.”
The U.S. approach
Malhotra: “In the U.S., there are multiple approaches being adopted with varying success. The device pay approach revolves around the efforts by Apple with Apple Pay and Google with Android Pay. Both have seen limited adoption. There are also variants such as Samsung Pay and LG Pay and institution-led initiatives like Chase Pay and Citi Pay. These are also very slow in gaining any sizable traction.”
RetailPay’s the way
Malhotra: “The system seeing the fastest adoption can be categorized as Retail Pay. These are retailer-branded, mobile payment initiatives that are targeted as part of the overall retailer experience extended to their shoppers. The most successful of these include, Starbucks App, Walmart Pay, Kohl’s Pay and Dunkin Pay. Each Retail Pay initiative combines unique elements of the overall retailer brand objectives, which differ from each other to a certain degree, but they all rely on the retailer’s own app as the starting point for the mobile payment experience.”
DJ: What are the obstacles to the take up if the technology?
Malhotra: “The main obstacle to adoption is the consumer learning curve. In most cases, if the system is implemented logically and flows into the regular shopping experience, adoption is much higher. On the other hand, systems that are disjointed and provide no incentive to the user are seeing little adoption. As an example, Apple Pay is seeing slow growth in the In-Store NFC mode, but rapid adoption for In-App payments. Why? Mainly because the in-store experience is not consistent, and oftentimes the readers are either not working or they are not prompting the user correctly. But for In-App, the payment process is so much simpler – almost 1-click.”
“The same can be said of Starbucks, which saw a slower adoption curve for a payment-only function, but a rapid increase in adoption when it was combined with “order ahead.” Kohl’s Pay took the challenge of reducing the checkout time by removing the need to scan multiple coupons, offers and cash-back rewards, but instead, applied all these automatically using a mobile interface. This led to a quick adoption curve. Secondly, the overreliance on antiquated POS technology is a major obstacle. The most successful mobile payments systems are being designed around the POS, rather than with the POS, and this allows for more flexibility and rapid adoption.”
DJ: What can be done to encourage greater take up in the U.S.?
Malhotra: “The U.S. may benefit from reducing the difference in fee structures between offline and online payments. In addition, regulations or mandates to push for newer forms of payment methods will help the industry as a whole. Merchants in the U.S. also need to move more quickly in experimenting with or adopting some of the newer methods of mobile payments being proposed. The same applies to the large financial institutions, which oftentimes slow things down. Lastly, there needs to be better education of the consumer around the inherent risks of card-based payments and how mobile payments can help alleviate those risks while offering convenience.”
DJ: What are the security risks? How can these be avoided?
Malhotra: “The more open electronic and SW systems that get involved, the more open they are to hacking. Simultaneously, modern mobile devices work as ideal authentication platforms, and their capabilities can be leveraged to gauge the level of fraud risk on a per transaction level. This is a capability that was never available to card-based transactions, where risks needed to be set up for the global worst case scenario vs the ideal scenario in the context of the transaction. When designing these mobile payments systems, developers should leverage the latest in security technology. If not, they are opening themselves to a direct hit by fraudsters.”
DJ: Please can you explain more about Omnyway
Malhotra: “Omnyway empowers retailers, banks and brands to build a contextual digital commerce ecosystem that encourages shoppers to use their mobile phone for all aspects of their buying journey. Omnyway creates a dynamic digital channel between the retailer and the shopper across all channels of interaction – in-store, online, in-app, virtual aisle and dynamic media, using any smart mobile device.
“The white label platform augments existing legacy back end systems and integrates into existing mobile apps in order to provide personalized experience to shoppers – one that leads to greater loyalty and increases revenue. The Omnyway platform is the technology behind Kohl’s Pay, IBM Pay and Wipro Pay. More recently, Omnyway has launched the Zapbuy service, which converts any ad (digital or physical) into a point of commerce.”
DJ: How did you get involved with this sector?
Malhotra: “I was the founder of a mobile payments company back in 2007 called DeviceFidelity. We pioneered the concept of plug-and-pay NFC, as well as neutral secure elements. Much of our work at DeviceFidelity was a precursor to modern day mobile payments solutions offered by the likes of Apple Pay and Android Pay.
“I saw first-hand that, while the experience of tapping and paying at a merchant location was cool the first few times, it did not really change customer behavior significantly; they quickly went back to their old habits of using their plastic credit cards. In the meantime, we started seeing a growing annoyance on the side of the retailers with the complexities of implementations being proposed for such point of sale based solutions, and the added costs of having to support them.
“Retailers want to focus on growing their business by offering the best customer experience possible, and not getting jammed into a one-size-fits-all solution that favors the solution providers but really does not solve for the merchants problems. After DeviceFidelity was acquired, I had the freedom to pursue a mobile payments solution from the merchant’s perspective, and was lucky to join the Omnyway founders early on to help build a company that would do just that.”
With fintech undergoing a dynamic shift, we also asked Malhotra to look to the future.
DJ: Looking ahead, what else is on the horizon for the digital transformation for the mobile payments sector?
Malhotra: “Things are moving quickly toward new forms of digital payments that are independent from the mobile form factor. The broader adoption of smart devices and IOT is dictating that move and, in the future, mobile payments will not be restricted to just mobile device, but instead will be built into the overall experience of consumer interaction with smart devices. Similarly, backend systems are evolving quickly.
“In the U.S., real time ACH will soon be a reality. Meanwhile, worldwide, the adoption of cryptocurrencies is becoming an interesting area for application of mobile payments. Some regions in the world are leading the charge and will become leapfrog markets, bypassing the widespread adoption of plastic cards in favor of mobile payments. China is already showing how this could happen, and many developing economies will follow.”
If Omnyway, along with other disruptors, is successful in their mission these activities will have made a major contribution in altering the behaviors of banks and retailers, in terms of legacy businesses embracing mobile payment innovation and meeting consumers half-way.