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Digitalisation of life -and wallets

This article is also available on Medium.

We are living in a digital world. From ovens to car keys, refrigerators to vending machines, each and every device is now running software. Every day we are getting more and more dependent on digital devices. (read it as software)

Excluding the computer and mobile phone, an average person in the Western World interacts with a device running some sort of software more than 30 times a day. Opening a door with an access card, taking an elevator, riding a car, buying snacks from a vending machine, etc are examples of these interactions. Smart phone is of course a huge exception to this; average interaction with a smart phone is between 50-200 times a day, depending on the addiction status of the person. These stats dramatically change when it comes to teens. Humans are now having more interaction with software than with actual humans -or any other life form for that matter.

Don’t get me wrong, I am not against this. This is not something you can go against anyway, this is an irreversible patern.

Digitalisation vastly improved our lives. We are now in continuous communication with our friends, work place, family, people from around the world with similar interests with us. What digitalisation brought to our lives is easier communications with our peers. But more importantly, most repetitive tasks have been replaced with an automated device or software.

Social media has become the single source of information for many people. We can say in confidence that; now there is media and social media. People now have the option to refine their news sources based on their own interests and timing. Traditional communication channels are now transforming into digital versions, the ones that do not digitalise are slowly turning into legacy items in history.

Of course, payments are no exception. Almost any where in the world, people are paying with EMV chip cards which run an operating system and a payment application software on the chip of the plastic card. If you are not making a face to face payment, then you are on a computer or a smartphone making another digital payment. Card accepting device is now either a physical POS terminal or a virtual POS processing transactions from many different channels over the internet.

Payment systems were pretty quick to embrace the digitalisation era. Cards were one of the first products turning into user name and passwords in order to enable payments via web browsers. Then mobile devices came into the picture. In the mobile world, authentication is simpler than web, everything became faster and more convenient for the user on a mobile device. Paying via a non-cash mean is basically a credential based authentication and mobile phones are great with authentication.

When everything started to happen so fast, things that are not so fast (like payments) started to feel the pressure. Typing in the card number was one of them. People can register many online resources via few clicks with their Facebook/Google/Twitter accounts, why not for payments? That’s when digital wallets came in handy. PayPal had already started the revolution long before consumer digitalisation started based on different business cases. Entering the card information once could enable many more benefits to the end user.

Digital wallets may seem in a not-so-fast growth path, but this is inevitable. Any product that is not transforming into digitalisation will end up in a parallelised state.

This is a good time to think about your favorite digital wallet product if you are benefiting enough of it. If you are not using one, you should consider choosing one. Digital wallets will not just streamline your payment experience, but will provide an extra layer of security.

Mobile Payments, Apple vs Google

This post was originally published on Medium.

Back in 2010, NFC was a huge thing within the payment professionals community. Every single bank, payment processor, carrier and fintech company (this term was not in the mainstream media back then) had some sort of mobile payment project. Each mobile payment meeting was starting with the agenda of how the mobile payment figures would boom in the next 2 years. Well, things didn’t turn out that way.

Essentially, payment is the authorisation of a person’s credentials for a certain amount of exchange by the financial institution that granted a risk limit to the transacting party requesting the product or service. When the NFC was supposed to be booming, the medium for the payment service was the so called secure element on the phone, which was the SIM card. This medium was owned by the carriers and they tried to make a big deal out of this ownership. Well, things didn’t turn out that way, either!

After the end of the SIM era, Google and Apple announced their value propositions to the mobile payment space.

Google provided the almost equivalent medium of the SIM for hosting the payment medium on the mobile devices. This is what we call Host Card Emulation, HCE. HCE existed before Google, but it was Google who made it available to a market at large. Google, being the platform owner of the Android eco-system, is the enabler for the mobile payments without the need of a third party between the customer and the financial institution. It is a pure software implementation, it is a balanced sharing of power between the customer, financial institution and Google. For the records, Google’s own mobile payment product Android Pay is another story.

Apple, then launched the ApplePay with typical Apple product features. It is a mobile wallet offering to the iPhone owners. The financial institution is somehow blurry within the service. Apple controls the hardware and software and no one else -including the iPhone owner him/herself has much option to act on his/her own other than what Apple is guiding. The mobile device becomes an interactive channel for the financial institution with its customer where the financial institution has no control over the whole experience other than provisioning the payment card.

The SIM based experiences showed the industry that the payment itself is not something that the customers are quite willing to accept on a mobile device. Especially considering all the hassle that the customer needs to go through for enabling the payment card on the device. Plastic cards are still very convenient to store, use and experience as a whole. When proposing the customer to use the mobile device instead of the plastic card, you need to provide the convenience of using an app on a smart phone that people choose over the computer; super fast, easy and intuitive. Learning curve must be natural. And this is not enough, smart phones have a lot of capabilities, you need to integrate components that make sense for people to use like location based offerings, personalised notifications for transactions, contextual reminders, etc. to create value over the plastic card experience. The traditional low acceptance levels of contactless readers is also not helping the mobile payment experience, but new mandates seem to overcome this issue in a few years. Also, Samsung Pay needs a special attention here, it comes with magstripe support on select devices, which is a unique proposition in the mobile payment space.

From the platform point of view, Google clearly is way ahead of Apple. Android platform for mobile payment is available worldwide right now, open and free, while Apple is selecting the countries to penetrate based on its own platform specific capabilities and restrictions. Almost all Android based mobile payment products except global players like Google, Samsung, LG, have been integrated with some financial service offerings like logging in with card PIN or mobile banking credentials, due date reminders, campaign offerings, limit monitoring, etc. Android is a platform where companies are free to choose what to and not to offer.

In the Apple world, financial institution is limited to a spot in the Apple Wallet and have no chance to provide any other service except the card image. There is no way to access the capabilities of the mobile device in order to enrich the mobile payment experience.

But when it comes to user profile, Apple is far more ahead in terms of customer base who are willing to and capable of making payments with the mobile phone. Android platform is quite fragmented, not just in terms of device attributes, but the user space is also not quite eligible for card payments. Although Android dominates the smart phone industry, Apple users are much more open to spend money on mobile apps and are more high profile than Android people.

iOS defines the user interface in a very intuitive way and iPhone users are very quick to pick up the experience as it is meant to be. Apple Pay is no exception to this. Enabling the card, making payments and deleting the card are all very smooth processes.

Android is far more behind this. Every single mobile payment application is unique for the whole process. People generally are not aware if their phone supports the contactless payments, since even same model devices have different variants in different regions.

So, when we look at the big picture, there is a long way to go for the time being. Apple is slowly gaining ground by penetrating into more countries and Android payment experience is slowly being streamlined. Masses are going to continue choosing convenience over security, price over quality and we will see how far the mobile payment products will go.