Mobile Payments: Effects in Developing Countries
In 2012 only 4% of in-store transactions were completed using mobile technology worldwide This number is expected to soar to 45% by 2017 (Factbrowser). Mobile payments is a broad and complex field; however the economic effects of its implementation in technologically developing countries is the topic under research, and more specifically, employing this technology through the use of Near Field Communication (NFC) devices and mobile wallets. The primary purpose of this investigation is designed to inform the general public about mobile payments as well as international commerce.
Additionally, this inquiry serves to provide a possible investment option for mobile service providers as they may see its significance. As a result of extensive research and analysis, it was determined that the implementation of mobile payment solutions in technologically developing countries, through the use of NFC devices and mobile wallets, will positively affect their economies. Before one may grasp the analysis and research discussed in this investigation, one must be informed on the basics of mobile payments. The field of mobile payments is the transfer of monetary funds via a mobile device and all related actions. The two most important things to learn specifically in regards to this research are NFC devices and mobile wallets. NFC devices are mobile devices that are able to communicate information and data with each other while they are in close proximity with one another.
Mobile wallets are applications on mobile devices that allow money to be stored and later spent or transferred. As far as the economies of these developing countries are concerned, most of them are societies in which only cash is used and there is little access to banking. However, there tends to be complete saturation of smartphones/devices, capable of making mobile payments, among the people (Paul Sabella). As society changes and progresses, humans develop wants and needs for newer, more efficient methods of doing everyday tasks. As far as making payments is concerned, mobile payments are an evolved method of payment, slowly being integrated into modern society.
There will become less and less of a need for cash as these technologies develop and it becomes inconvenient to carry physical money and eventually, “cash will find itself on the endangered-species list. Paying by phone will be as transformative as the advent of the credit card in the 1950s. It will change the way we shop and bank.” (Miguel Helft). Not only are mobile payments more “modern” than conventional methods of payment, they are more effective and efficient, making them relevant in society. For example, most large scale payments are conducted electronically and mobile payments provide a method for smaller, common purchases to be transitioned into the electronic world.
These electronic payments allow for more accurate record keeping, but the transaction has to be carefully tracked, which poses the question of how these transactions can be monitored to ensure their security. When storing one’s assets on technology such as a phone or tablet, security is one of the first questions brought to mind to make sure that the money is kept safe from theft or data corruption. As a general set of rules and regulations that everyone is required to follow, there is PCI Level 1 compliance. If a company does not abide by these rules, their product is considered to be untrustworthy and is marked as a pariah until it meets Payment Card Industry (PCI) Level One compliance. Additionally, there is application level security that prevents sensitive data from being stored or retained. The data is encrypted and the encryption keys are injected into the card head reader so there will be an encrypted output and no personal data can be stolen (Chase).
Also, mobile payment technology providers need safe server hosting so that the site cannot be hacked and have peopled’s private information stolen. To achieve this, companies use “https://” as it is a secure site and is not entirely public. The public, however, has a huge part in the success of mobile payments as it relies on the general public’s acceptance of it. Generally speaking, most technologically developing countries in the world are situated in South America or Africa. For the most part, these countries have either Socialist or Command economies, so a singular mobile payment solution can be chosen by the national government. This is incredibly helpful for mobile payments because many different mobile wallet applications aren’t interchangeable and can only be accepted by a specific technology, making problems if there is more than one mobile wallet in use.
For example, M-PESA in Kenya accounted for 10% of the monetary transactions of Kenya’s GDP and was used by 70% of their adult population (The World Bank). This is an incredible result as it encompasses the majority of a country’s population and is the most widespread example of mobile payments in use. Additionally, developing countries tend to experience periods of incredibly large economic expansion, so a spark such as the implementation of mobile payment solutions could trigger a large period of growth and positively affect the economy. This rapid expansion benefits all parties involved in the payment process, the service providers, the merchants, and the consumers, in turn stimulating the economy and encouraging growth. In addition, most people in developing countries have a smartphone of some sort to use as their main form of technology.
Therefore, there is the potential for very widespread penetration, having the ability to be available to almost everyone in the country. Also, such a system may be looked on favorably by the federal government because it costs far less to pay their employees using mobile payments than the current method of payment. Payments with these mobile payment solutions can also be accurately documented, unlike with cash-only sales, and is incredibly useful for taxation purposes. This provides an incentive for the government to buy into the system and nationally implement mobile payments. However, the method by which mobile payments should be conducted then comes into question. The most effective method of implementing mobile payments in developing countries is through the use of NFC devices and mobile wallets.
A mobile wallet acts as a portable bank of sorts as one can carry their money on their person securely, without having to have any physical money with them. This results in a more secure and efficient method of payment than by conventional means, and could solve many of the banking problems in these undeveloped countries. NFC devices communicate through the air so it is very fast, efficient, and secure. NFC devices are also practical to use because most current smartphones have NFC capabilities which makes an easy way to communicate between devices. Additionally, if a phone, such as the iPhone, doesn’t have NFC capabilities, they can simply be added with a basic accessory. “DeviceFidelity’s patented case for iPhone is an iPhone accessory that enables NFC on iPhone and provides a secure element for on-device security and online services.
The DeviceFidelity solution implements a smart design that includes a microNFC which is a microSD form factor that embeds certified secure element as well as NFC controller for reader mode support.” (Device Fidelity). This means that an iPhone can be given NFC with only the use of a phone case, as well as being incredibly safe with a microNFC and a secure element. Therefore, it is very applicable for people to have NFC enabled products and for merchants to accept their payments with another NFC device. Some NFC devices and mobile wallets have actually been implemented in developing countries with stupendous results.
While mobile payments have not been used very much in society as of now, the examples of implementation have been incredibly successful. The best example has been M-PESA in Kenya, where its transactions accounted for 10% of the monetary GDP and was in use by over 70% of the adult population. This is an incredibly large scale use of mobile payments that required coordination and cooperation among the Kenyan people to widely embrace this new technology. Additionally, service providers have been able to implement mobile payments in methods that are beneficial to the local economies, such as iCow in Nigeria which has a largely agricultural economy. iCow allows for users to make sales or purchases using their NFC enabled mobile device, as well as monitoring the condition of the cow (Safaricom). This is a very reasonable application of mobile payments as the transactions of cows are a very important part to the Nigerian economy.
Additionally, a company called Absa made an NFC payment trial in South Africa by enabling phones with NFC capabilities through the use of a microSD card (Karl Dyer). The trial spurred a period of economic growth and was so successful that the trial was extended and the test pool was increased. These results involving the success of mobile payments are very conclusive and can be analyzed. Mobile payments are an effective method to address a banking problem in technologically developing countries. They have extensive security measures to prevent theft of personal financial data and are extremely secure.
The best method of mobile payment implementation is with mobile wallets and NFC devices as they are fast, easy, and secure to use. Ultimately, as a result of analysis of multiple studies involving the implementation of mobile payment solutions (see data analysis), it can be determined that the integration of mobile payments, by using NFC devices and mobile wallets will positively influence the economies of developing countries. Works Cited Dyer, Karl. “Absa Expands NFC Payments Trial.” NFC World. SJB Research, 2 Sept.
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