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11.6 Mobile Payments 349

Amazon, then the customer will be asked to confirm or select 4. What is Amazon Payments? What competitive threat does
from the cards and shipping addresses that are associated it pose for PayPal?
with the account. If he or she doesn’t have an account, they 5. What are some of the key gateways used in other regions
be guided through the enrollment process. While Amazon is of the world?
not an immediate threat to PayPal, they may be in the future.
It is estimated that are over 50 million U.S. Amazon Prime
members, which represents close to 50% of U.S. households. 11.6 MOBILE PAYMENTS
Amazon already has their payment information on hand and
these customers are all familiar with the simplicity of their Because of the strong growth in mobile usage worldwide (see
patented “By now with 1-Click” button. Section 11.1), there continues to be a strong belief that mobile
Globally, PayPal is also the market-leading gateway. payments will emerge as a primary way to pay, potentially
PayPal is used extensively throughout the world. In a number eliminating dependence on cash, cards, and other modes of
of countries PayPal is one of the preferred payment methods EC payment. While mobile payments are growing rapidly,
behind cards, often handling between 10 and 15% of all pay- they will not supplant cash, cards, or even other forms of EC
ments (Adyen 2015). This is the case, for example, in France, payments anytime soon. According to eMarketer (2016),
Germany, the UK, and Australia. However, in select coun- mobile payments reached $450 billion in 2015 and will grow
tries there are other gateways that are used more often. to $1 trillion by 2019. To put this in context, in 2015 mobile
Included in this group are: payments accounted for 24% of all EC retail sales and 1% of
total retail sales. By 2019, they will account for 30% and 4%,
• Sofort (sofort.com) in Germany. Gateway that relies on respectively. These shifts reflect a substantial amount of
direct bank transfers rather than cards. growth in mobile payments that sellers cannot ignore, but it’s
• Wirecard AG (wirecard.com in Germany. Offers cashless important to remember that in relative terms usage is still low
payment and other payment services both within Germany when compared to all other forms of payment.
and worldwide.
• Yandex.Money (wirecard.com) in Russia. Partnership
between Srebank and the search company Yandex. Types of Mobile Payments
Handles cash, bankcards, and e-money.
• Qiwi (qiwi.com) in Russia. Payment service that is pub- The term mobile payment refers to payment transactions ini-
licly traded on NASDAQ and headquartered in Cyprus. It tiated or confirmed using a person’s mobile device, usually a
also operates in Kazakhstan, Moldova, Belarus, Romania, smartphone although payments can be made with other mobile
the United States, and the United Arab Emirates. devices such as tablets and wearables. The term actually cov-
• Alipay (global.alipay.com) in China. Part of the Alibaba ers a number of different types of solutions, as well as different
group discussed in the opening case of this chapter. Like combinations of hardware and software technologies.
PayPal it is a full-service payment gateway servicing Just like online payments, there are many parties involved
domestic and cross-border transactions in China. in any mobile payment system (see Figure 11.5). From the
• Tenpay (global.tenpay.com) in China. Second largest standpoint of the various parties, any successful mobile sys-
payment service. It’s owned by Tencent who also owns tem needs to overcome the following sorts of issues:
China’s largest social network Weibo.
• iDEAL (ideal.nl) in the Netherlands. A payment service For Buyer: Security (fraud protection), privacy, ease of use,
in the Netherlands that uses direct bank transfers. choice of mobile device.
For Seller: Security (getting paid on time), low cost of oper-
With the exception of China, in each of these countries ations, adoption by sufficient number of users, improved
PayPal is still used. speed of transactions.
For Network Operator: Availability of open standards, cost
of operation, inter-operability, and flexibility and roaming.
SECTION 11.5 REVIEW QUESTIONS For Financial Institutions: Fraud protection and reduction,
security (authentication, integrity, non-repudiation; see
1. What is PayPal? Chapter 10), and reputation.
2. Why was PayPal more successful than its competitors?
3. What is a third-party payment gateway? Describe how one Most of today’s mobile payment solutions are designed to
works? replace existing payment methods including non-digital