Mobile payments are a natural evolution e-payment schemes that will facilitate mobile commerce. A mobile payment or m-payment may be defined, for our purposes, as any payment where a mobile device is used to initiate, authorize and confirm an exchange of financial value in return for goods and services. Mobile devices may include mobile phones, PDAs, wireless tablets and any other device that connect to mobile telecommunication network and make it possible for payments to be made.

POTENTIAL OF M-PAYMENT

      Simplicity and Usability: The m-payment application must be user friendly with little or no learning curve to the customer. The customer must also be able to personalize the application to suit his or her convenience.

      Universality: M-payments service must provide for transactions between one customer to another customer (C2C), or from a business to a customer (B2C) or between businesses (B2B). The coverage should include domestic, regional and global environments. Payments must be possible in terms of both low value micro-payments and high value macro-payments.

      Interoperability: Development should be based on standards and open technologies that allow one implemented system to interact with other systems.

      Security, Privacy and Trust: A customer must be able to trust a mobile payment application provider that his or her credit or debit card information may not be misused. Secondly, when these transactions become recorded customer privacy should not be lost in the sense that the credit histories and spending patterns of the customer should not be openly available for public scrutiny. Mobile payments have to be as anonymous as cash transactions. Third, the system should be foolproof, resistant to attacks from hackers and terrorists. This may be provided using public key infrastructure security, biometrics and passwords integrated into the mobile payment solution architectures.

      Cost: The m-payments should not be costlier than existing payment mechanisms to the extent possible. A m-payment solution should compete with other modes of payment in terms of cost and convenience.

      Speed: The speed at which m-payments are executed must be acceptable to customers and merchants.

      Cross border payments: To become widely accepted the m-payment application must be available globally, word-wide.

CONSUMER’S ADOPTION STRATEGIES

Bank Account based M-Payment

Banks have several million customers and telecommunication operators also have several million customers. If they both collaborate to provide an m-payment solution it is a win-win situation for both industries. In this model, the bank account is linked to the mobile phone number of the customer. When the customer makes an m-payment transaction with a merchant, the bank account of the customer is debited and the value is credited to the merchant account.

Credit Card based M-Payment

In the credit card based m-payment model, the credit card number is linked to the mobile phone number of the customer. When the customer makes an m-payment transaction with a merchant, the credit card is charged and the value is credited to the merchant account. Credit card based solutions have the limitation that it is heavily dependent on the level of penetration of credit cards in the country. In India, the number of credit card holders is 15 million. Only this small segment of the population will benefit in the credit card based model. Though limited in scope, there may be high demand within this segment for a payment solution with credit cards and also, may provide high volumes of transactions.

Telecommunication Company Billing of M-Payments

Customers may make payment to merchants using his or her mobile phone and this may be charged to the mobile phone bills of the customer. The customer then settles the bill with the telecommunication company. This may be further classified into prepaid airtime (debit) and postpaid subscription (credit).