Page 363 - Introduction to Electronic Commerce and Social Commerce

350 11 Electronic Commerce Payment Systems and Order Fulfillment

Figure 11.5 The credit-based
transportation card displays the
fare and accumulated charges for
the current month at the ticket
gate (Photos by J. K. Lee)

(cash or credit) and digital (PC-based). As such, they tend to The term mobile digital wallet refers to the combination
fall into one of four payment types (distinguished by “who of an electronic account along with a smart phone and mobile
pays whom”) including (Allum 2014): app designed to make purchases digitally and to redeem
rewards from loyalty programs and targeted digital promo-
• Consumer. Buyer pays a merchant for goods and ser- tions. There are two main types of wallets—device-based
vices. This is the purview of most digital wallets (e.g., and cloud-based.
Apple Pay).
• Merchant. Receiving money from a customer in exchange Device-Based Digital Wallets
for goods and services. Often enabled by mobile POS These are proximity payment systems enabled by near field
(e.g., Square). communication (NFC) technology. On the consumer side,
• Person-to-Person (P2P). Money exchange between two the system requires that the mobile device being used is
or more people, as a gift or payback (e.g., PayPal’s equipped with NFC antenna and an integrated chip or a
Venmo). smartcard inside the phone that holds payment card infor-
• Institutional. Managing and paying bills from an institu- mation (credit or debit). On the merchant’s side, it requires
tion (like a utility company) for services rendered (e.g., a specialized NFC reader used to recognize the chip when
Finovera or Mint). the chip comes within a short distance of the reader, and a
network for handling the payment. Essentially, a buyer first
The fact that these payment types are all designed to sup- enters his or her credit card information into the wallet app
plant or cannibalize existing nonmobile payments systems on the phone prior to shopping. At the time of the purchase,
may be one of the reasons for their slower than expected the buyer then “waves” the specially equipped mobile
uptake. To many potential users, mobile payments applica- phone near a reader to initiate a payment. The reader col-
tions are simply “credit card surrogates: they’re a veneer over lects the info and passes to the payment network. The card
what already exists.” So, why change especially since they is charged and the purchase is complete. These proximity
are all underpinned by substantial technological ecosystems. payments are also called contactless payments where the
We won’t discuss institutional payments in this chapter, phone plays the surrogate roll of a contactless card with a
but we will describe the other three types of mobile payments chip (see Section 11.3).
in this section along with their underlying technologies. In the past there were few wallets on the market. Today,
while there a large number of device-based wallets (last count
Mobile Consumer Payments: Wallets, over 1000), the most popular are PayPal wallet (paypal.
Clouds, and Loops com), Apple Pay (apple.com/apple-pay), and Android Pay
(android.com/pay).
As a recent Accenture (2015) survey of 4000 respondents in Over the years, a number of protocols and technologies
North America shows, the average consumer’s exposure to have been proposed to support proximity payments (e.g.,
mobile payments is through his or her mobile digital wallet. from mobile devices). NFC has won out. It is now used for a
Among the more popular wallets are PayPal, Apple Pay, and wide variety of purchases including those in-store, from
the recently morphed Google Wallet (in that order). vending machines, and from transit ticket dispensers or fare