For the past 10 years or so, online and mobile payments have become the norm, speeding up the rate and volume of commercial transactions.

Recent research by I.E. Market Research shows that mobile phone payments, alone, were worth US$31.5 billion dollars in 2010. Global mobile phone payments are predicted to continue rising dramatically and be worth around US$950 billion in 2015 and US$998.5 billion by 2016.

Developments in the form of alternative payment methods, both online and mobile, as opposed to credit cards, have advanced in leaps and bounds, as a variety of highly innovative technological developments have surfaced in the payments industry.

They allow people to shop remotely much more comfortably, quickly and easily than ever before. Retailers can grow their businesses and provide better service to more customers, offering a variety of payment methods, giving people more freedom to pay how they choose, and widening the customer base and the product offer.

Among the more significant of these developments are the emergence of e-wallets and digital currencies, such as Apple Pay, Google Wallet, and bitcoin. Let’s have a quick look at each of these to get an overall picture of the environment.

E-Wallets

Consumer adoption of e-wallets depends on a compelling commerce experience. E-Wallets speed the checkout process and make a consumer’s life easier, or they offer some type of reward. Merchants, banks, and telecom providers are providing a number of alternatives; most recently Apple with Apple Pay, and the Google Wallet. In addition, we have the new PayPal digital wallet which links all cards, including Visa and MasterCard. PayPal also allows its customers to transfer money directly from their bank accounts. This has occurred since the PayPal spin-off from eBay in July.

Another entrant into the scene is Facebook. That’s right: Facebook rolled out a payment feature on its messenger app nationwide in June, 2015 allowing easy person-to-person transfer of money. The feature requires users to add a MasterCard or Visa card to their accounts.

How do they work?

The consumer uses web pages displayed or additional applications installed on the mobile phone to make a payment. Benefits include:

• Follow-on sales where the payment confirmation pages can lead back to retailers or goods the consumer may like.
• High customer satisfaction from quick and predictable payments
• Ease of use from a familiar set of online payment pages

Apple Pay, which we discussed in a previous blog post, is a mobile payment and digital wallet service by Apple Inc. that lets users make payments using the iPhone 6, iPhone 6 Plus, Apple Watch-compatible devices, iPad Air 2 and iPad Mini 3. Apple Pay will work with Visa’s PayWave, MasterCard’s PayPass, and American Express’s ExpressPay terminals. The service lets Apple devices wirelessly communicate with point-of-sale systems (users hold their authenticated Apple device to the system). Customer payment information is kept private from the retailer. Users can also remotely halt the service on a lost phone via the Find My iPhone service.

Early reviews of the service regarded it as easy to use, “remarkably smooth” (The Verge Nilay Patel[1]) and “a cohesive user experience” with the process taking 5 to 10 seconds at a retail card reader. On the other hand, The New York Times’ Neil Irwin[2] wrote that Apple exaggerated the inconvenience of credit cards. Among the plastic card’s benefits, he included how others could make purchases on another’s behalf and how dead cell phones could leave the owner stranded.

Google Wallet is a payment system developed by Google that allows its users to store debit cards, credit cards, loyalty cards, and gift cards among others, as well as redeeming sales promotions. The integration of Google Wallet and Gmail, allows users to send money through Gmail attachments. Like the main service, Google Wallet’s Gmail integration is also currently only available in the US, to those 18 years of age or older.

Digital Currencies – Bitcoin

Bitcoin is a form of digital currency, created and held electronically. It’s the first example of a growing category of money known as cryptocurrency. Bitcoins aren’t printed, like dollars or euros, nor are they based on gold or silver, like conventional currency – they’re produced by people and based on mathematics.

Bitcoin can be used like conventional dollars, euros, or yen, but it is decentralized. No single institution controls the bitcoin network. This puts some people at ease, because it means that a large bank can’t control their money. Other people however, may feel a little insecure, because there is no central responsible or accountable institution in control.

People are now using software programs that allow a freely available, open source mathematical formula to produce bitcoins. Bitcoin has several important features that set it apart from government-backed currencies.

It’s decentralized: No control by one central authority. Every machine that mines bitcoin and processes transactions makes up a part of the network. If some part of the network goes offline for some reason, the money keeps on flowing.

It’s easy to set up: A bitcoin address can be set up in seconds, without all the normal banking bureaucracy involved, and no fees are payable.

It’s anonymous: Users can hold multiple bitcoin addresses. They aren’t linked to names, addresses, or other personally identifying information.

Minimal transaction fees: Fees are unrelated to the amount transferred, so it’s possible to send 100,000 bitcoins for the same fee it costs to send 1 bitcoin.

It’s fast: You can send money anywhere, and it will arrive minutes later, as soon as the bitcoin network processes the payment.

Security: Bitcoin transactions are secured by military grade cryptography. Nobody can charge you money or make a payment on your behalf. Bitcoin can give you a strong level of protection against many types of fraud.

These examples are only the tip of an enormous iceberg of some very exciting developments in the world of online and mobile payments. In the next blog post, we will explore even more alternative payment methods in great detail.

[1]  Patel, Nilay (September 9, 2014). “Apple Pay hands-on: is this the future of payments?”. The Verge. Vox Media. Archived from the original on September 13, 2014. Retrieved September 13, 2014.

[2]  Irwin, Neil (September 10, 2014). “Apple Pay Tries to Solve a Problem That Really Isn’t a Problem”. The New York Times. Archived from the original on September 14, 2014. Retrieved September 14, 2014.