The Payment Revolution – Mobile Wallets to Cryptocurrency onto Wearables

The payment system saw a revolution from 2013. Slowly, but swiftly there were various payment concepts circulating and infiltrating the markets. E-commerce, of course, propelled the need for alternate payment methods from cash/cheque/draft onto a credit card, bank transfer, and e-wallets. There were concerns raised around privacy, interoperability, and security – which had quite a few of these ideas dwindled away. But eventually, the policies strengthened, the security and encryption ensured safety and privacy, and there we have a plethora of e-wallets as a viable option of replacing the plastic jumble of credit cards in your physical wallet.

Mobile Wallet is an electronic wallet powered by your phone or an app on your phone. Smartphones further engaged this concept and evolved on this. It makes sense with the multitude of digital commerce services to have a consistent approach to organize payments and transactions[1].

So, this made life easier when it came to shopping, ordering food, booking cabs, even buying flight tickets. A prepaid version of this becomes the electronic wallet, while mobile money takes the spin-off direct carrier billing to ensure people can send, receive, store and spend money using a mobile phone and tie them back to a phone number. In GSMA’s 2018 State of the Industry Report on Mobile Money – there were two important takeaways:

  1. Complex Regulations – As the digital financial services are growing exponentially, most countries and regulatory bodies are struggling to adapt and revise policies. The report mentions 5 main themes dominated the mobile money regulatory landscape in 2018: taxation, KYC requirements, cross-border remittances, national financial inclusion strategies, and data protection.
  2. Mobile Money value proposition – Currently Mobile Money vendors that responded to the GSMA Global Adoption Survey reported steady year-on-year revenue growth (23.9 percent on average). But this revenue is mostly driven by customer fees. The change this observation has triggered is an expansion in the mobile money business model to become ‘payments as a platform’ bringing individuals, small businesses, e-commerce, and telecom companies.

I mean, of course, this is a reality now. It is not even about actual money anymore, crypto wallets and ICO (initial coin offering) – taking this to a whole different paradigm. Backing up a bit – unlike other wallets and mobile cash we were discussing, a cryptocurrency wallet stores private and public keys that give you access to various blockchains which enable transactions on digital currencies like Bitcoin, Ripple, etc. So, the crypto wallet doesn’t store currency, rather records of transactions which confirm your ownership of coins. Most articles mention crypto-wallets are pseudonymous. Your pseudonym is the address in which you receive your currency. If the address is linked to your identity, so are the currency.

Earlier this year, in Mobile World Congress, I attended a session by Tappy Tech, the first licensed Wearable Token Service Provider of its kind. They offer a unifying platform for digital and mobile payments to watch brands like Timex, enabling them to turn their products into mobile payment carriers. This is bringing in a new wave of contactless payment devices, linked to credit cards or bank accounts. These usher in a technology that works on uber low battery and even on non-chargeable devices.

Most markets heavily support online and cashless transactions now, and this is that sweet spot which is also driving financial and economic inclusion. Payments revolution is heavily increasing the reach for financial and fin-tech innovations into regions and populations that have thus far been out of the reach for most traditional transaction mechanisms – mainly banks. Breaking this barrier is revolutionizing payments, and opening up newer business models, product concepts and use cases. Since this is opening up information and access in a completely new way, an aspect that we need to focus on – at various levels: individual, organization, regulator, and government – is for the security and policy to keep up with the changes. This is essential for the ecosystem to sustain and thrive.

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