How to build the worst payment system in 10 steps! [Part2]


How to build the worst payment system in 10 steps!Building a reliable and robust mobile payment system is always a challenge,it requires good analysis from business, marketing and technical teams together to deliver a simple, secure and convenient system to the end users. On the other side there are some trivial mistakes some people do, and this quick guide list some hints to help you to avoid making such mistakes unless your target is to build a system to fail!

This article is Part2 and you are advised to check Part1 to get a clear idea on how the article is listed.

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How to build the worst payment system in 10 steps!

During my journey with mobile payments and payment gateways, I was lucky to see and evaluate multiple payment solutions and systems.I have seen a lot of amazing and well designed systems and was also lucky to see some other systems that scored very law on my evaluation charts. And guess that most of them disappeared now and failed as expected!
Worst mobile payment systemWithin this series I will list the most critical points I used in my evaluation as guide line for any one wants to build a system to fail, and it worth mentioning that you can use the below tips on your own risk with no liability on the author![Hint] I will add some comments after each tip for explanation.

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Mobile Payment, Apple pay Et tu, Brute?

Few days ago the giant smart phone manufacturer Apple announced its new payment product ‘Apple pay’ and finally iPhone will come with NFC port in a step that all the world identified as very late step from Apple side!

Apply pay

Apart form the new introduced techniques, the added security value and the new payment experience, the announced product did not add any new value or proposition to the mobile payment industry.

 

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Mobile Payment, and here comes loyalty!

Through our previous article Cash-In the passion fruit we explored how Cash-in can be a pain to any new mobile payment installation, and in the previous Saving the titanic article we explored some potential benefits for mobile payment.

Mobile payment loyaltyWe will carry on here to explore hidden benefits and values in mobile payment, and why we should consider mobile payment as on of the most innovative or revolutionary product.

Mobile payment is a new way to redefine our daily relations and operations, adding new unlimited features and helping the economy rising in emerging and poor countries.

 

Merchant boundaries,

If you are a certain product or store chain fanatic, most likely you are subscribed to your addicting product loyalty program either through mobile application or a plastic card. In developed countries users might join unlimited loyalty programs and during their daily trades they keep collecting points from different merchants and redeem it with simple gifts or discounts from time to time.

In emerging markets, with the absence of such mega stores or chains customers that does not have the same motivation to spend money, such deals or offers can’t be sponsored with those local dealers and micro merchants.

Value limits,

Another factor would be the transaction value, its a fact that mobile payment is designed for mini scale transactions, and tracking those micro payments will be a headache specially that a lucky customer should perform thousands of transaction to reach the minimum announced loyalty limit.

Due to the above limits both customers and merchant usually lose passion for loyalty programs and it does not help retaining a loyal customer or even help merchants to increase their sales, moreover it does not allow manufactures to run regular offers as usual.

Mobile payment and loyalty collection,

Thinking out of the box to overcome this situation mobile payment can help introducing a new loyalty concept, rather than being rewarded from a certain manufacture after achieving a preset purchase target. Loyalty programs may be combined under a group of merchant alliance offering customers rewards on the accumulated purchases target.

With your limited value purchases customers may collect points on their total bill value regardless the product or the store they are shopping in! Imagine collecting points for paying your monthly bills, buying food, coffee, pencils … etc. And being rewarded with unlimited rewards category from the program sponsors.

Rather than being focused on a certain brand mobile payment with its tracking capabilities will allow merchants and stores to run a new vertical loyalty concept, helping customers to stay engaged and increasing the traffic for merchants.

Photo Credit: http://ih.constantcontact.com/fs170/1103447193880/img/248.jpg?a=1114698228637

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Mobile Payment, Saving the Titanic!

Over long decades, billions of financial transactions took place every day varying from purchasing food, coffee, clothes, tools, digital products and up to online purchase.

Mobile payment benefitsThose types of financial trades are not recently invented. No, actually it has started since those early days where people were trading goods with goods in a process called bartering, and as the society were developing, people touches the need to facilitate this process and find a way to store their wealth in a shape that does not rust, rotten or vanish, and it started with gold!

 

Since this time the financial trades and purchases passed through multiple changes and you may call it enhancements from gold and coins to paper currency and banknotes. Banks were established to provide a financial cover, and soon the world was heading to the electronic and plastic cards where the financial institutions had been pushing the society to convert to a cash less society! And due to implemented infrastructure, Banks were not sufficient to cover all the needs especially in emerging markets –as we previously discussed here– that’s where mobile payment was born.

On a dynamic and connected world like ours, financial trades are passing from country to country creating new market opportunities for those type of legal trades and resulting a pain for trades linked to criminal or illegal activities. And the ongoing effort to push for mobile payment is not just looking for stylish or elegant payment model,it’s more into control the daily money flow to save our titanic before it sinks!

What we are about to explore today is some of mobile payments benefits showing the –good side- of mobile payments.

Mobile payment to a theft crime- less society,

Whenever a theft crime happens the thieve tries to clear his footprints and not to be traced, that’s why the money laundering overseas happens and it will need different and more complicated techniques to trace it,but in smaller amounts after a theft crime,the thieve will spend the money buying small items and cash tracing is almost impossible.

In a Cash-free society, even stealing the victim mobile with its stored wallet still will be traced and on the first purchase request he will be surrounded by cops on spot. A live example for this theory is the decreased number of stolen iPhone devices after Apple Kill Switch implementation,it was simply decreased because thieves were sure that they will be always traced.

Mobile Payment to a drug-free society,

Whenever a drug store is reported and the cops catches the dealer it takes time and effort to trace his network and connections and it might not work all the time, but again in a Cash-free society when a dealer is caught, just you imagine that a simple transaction report will show the whole network starting from customers,other dealers and even their customers too.

Mobile payment save lives,

In emerging markets multiple crimes happens every day in an endless wrestling and race for food and security. It is simple to murder a poor guy for just a suspicion that he might be holding some cash. This crime risk increases in rural areas where citizens needs to do long trips to pay some fees or monthly installments – like what happens here.

Whenever mobile payment solutions were deployed,peoples were able to get rid of those risky trips and with a simple key press they were able to transfer those amounts avoiding the risk for a may be last trip!

And many more,

With a mobile wallet implementation,it’s easier and faster to transfer money in emergency cases to a relative or even a strangers whenever bank networks is not available, and helps in collecting donations or other charity activities.

It will also support in fighting the money laundering process where the specialized anti-laundering solutions and controls will take care of the big money chunks, mobile payment will carry on detecting whatever small amounts were missed or escaped!

Capitalizing on the same base,you may now notice that mobile payment is not just a fancy or fashion solution, but definitely it’s more into a real need to help both people and governments to overcome multiple issues and it could help in lowering the crime rate in a typical country.

Still there is a dark side and the cup is not totally full, we might need another article to carry on with the mobile payment devil side!

Photo Credit: http://drewpan.files.wordpress.com/2012/07/stealing_3673.jpg

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Mobile Payment; NFC, Why? and Why not?! [2 of 2]

In the previous article we went through the NFC and the need behind this technology, we have reached a conclusion that the data transmission technology is one of the major challenges vendors and wallet issuers are trying to surpass to allow Mobile payments to boom and start taking some of the payment cards share.

Mobile payment NFCNFC is one of the possible solutions that might help, but still there are some challenges delays the new technology expansion.

We will try to list the major challenges NFC is fighting against in the blue few bullets to be as an indicator for your weather to launch or postpone your upcoming NFC products.

Feature mobiles,

It’s a fact that NFC is made only for elected segment of smart phones, not even a generic technology for all manufactured phones, and it’s a fact that the famous Nokia 3310 will never support this advanced technology!

Still it needs more time and pressure on handset vendors to adopt NFC antenna by default, and you have to understand that your solution will only work with limited number of devices. The more time you can wait the more customers you may gain, otherwise it will end up with an annoying sign (Samsung Galaxy 3, 4 and 5 only supported!).

And even smart phones,

From each smart phone brand still only a series or two comes with NFC support, and again some famous brands like iPhone has not implemented this technology yet – that iPhone 6 might support NFC- and again you still have limited coverage and penetration issue.

The wallet solution,

Each mobile wallet system has its own processes, interfaces and APIs. While account number is mandatory for a certain wallet system to process a new payment order, it might be unnecessary or even not considered at all in another solution from a different vendor. It means that a mobile APP for solution A will not transmit the same information submitted from another mobile APP developed for solution B.

Back to the POS,

With respect to the previous point you may think how a single POS may support multiple wallet vendors, and you have to consider that mobile payment must be a cross-border service, where you should not limit your design to only the local vendors in your country, you still need to consider other international wallet roamers that will appear on your system from time to time trying to submit payment orders using your platform.

Standards,

In a final conclusion, NFC is a channel of communication with a proven security and maturity specifications. But still it needs more support and push from vendors and mobile manufacturers to boom.

Worth mentioning that NFC as a contact-less payment features is not limited or restricted to mobile operators or mobile wallet vendors. The exiting card players are also investing in this track trying to upgrade their payment systems to be more interactive and enrich it with extra digital and fancy options.

Is NFC the real future or a dead technology? As you may noticed its very hard to answer this question with a sharp and clear answer. We still need to wait and see what the future is holding for this long debate and I’m sure we will be surprised at the end!

Photo Credit: http://www.emobilepos.com/wp-content/uploads/2013/01/eMobilePOS.jpg

Mobile Payment; NFC, Why? and Why not?! [1 of 2]

NFC is one of the hottest topics in payment, you will notice this hot topic wherever there is a discussion related to mobile payment and you will many arguments about NFC as the future while others confirms that NFC is a dead technology.

Mobile payment NFCIn this article we will go through NFC and its related challenges, at the end of this article the same question will remain unanswered, Is NFC coming or passing away? There is no final answer and the debates will carry on.

What is NFC?

Apart from the technical definition you may check here, I will try to simplify it with a direct need example so you will have an idea about the NFC benefits and why there is a lot of debates around it.

In my own pocket wallet I have many cards Credit Card, Debit Card, Medical care Card, Kids zone Card and Club access Card. All cards has the same width, height, thickness and the most important is the magnetic strip bar. This magnetic bar exists with the same measures and the same exact location regardless the card manufacturer or purpose, which make it easy to a typical POS machine to read it and transfer the stored information which might differ from a card to another (Account number, Balance, Last access, Name … etc.).

It is just a matter of which information the manufacturer previously saved, and the POS software is developed to read to transfer it to the back end system for final processing and handling, before displaying the friendly message ‘Transaction Completed’.

Why NFC?

Now let’s try to relate the above traditional card payment process to the mobile payment industry, how do you imagine the mobile payment POS? Should it fit the iPhone size? iPhone 3, 4, 5 or 6.

How about Samsung devices? How it could fit Galaxy or Note devices at the same time? Should we think about other Samsung brands like Mega, Ace and Y … and how may we ensure it will fit HTC, Black berry or Nokia devices?!

Bluetooth,

Ok let’s forget about designing a POS based on shape or size and think about other technology like Bluetooth as example. Bluetooth is a good option but there are some draw backs too.

  • iPhone does not support all Bluetooth functionality like android or Nokia
  • On other side Bluetooth has a wide coverage range and could be spammed, you must passed through this horrible experience with an unknown device trying to send you files forcing you to set your Bluetooth off
  • It takes a time to setup
  • And some more … [Click here for extra information]

The need,

There is real need to find a way to transfer the payment data from mobile to the merchant awaiting device. Vendors and payment processors are trying to look for a standard way to transfer the payment data from the mobile device to the POS machine.

The need behind this is to support the retails and stores daily payments without the need to use multiple POS machines and with a unified payment experience. A typical user must follow the same steps regardless his mobile type or wallet issuer.

In Part2 we will explore the NFC opportunities and challenges so please stay tuned!

Photo Credit: http://mycanadianmerchantaccounts.com/wp-content/uploads/2012/11/debit-machine.png

Mobile Payment, “Cash-Out” ; the poisoned apple!!

In a traditional mobile payment implementation, Cash-Out is an expensive service where the service provider charges extra fees to perform a Cash-Out request.

Mobile payment Cash outIts a fact that you may have a big revenue churn generated only from Cash-Out service, and you still have an edge compared to other traditional and old fashion money transfer services. But sooner you will discover that you were another victim for this poisoned apple!

However you will have an edge from the fees side compared to other alternatives, but you will not have no chances to compete against other competitors from the same industry.

And when the prices war starts, you will notice that you don’t have any loyal customers. Customers will join multiple wallet services in their region and will simply transfer through the lowest rate offered and they will be your promotion period users-no more!

To avoid this critical situation you will need to activate your Anti-Cash-Out filter even before you launch your service commercially. Your day to day activity should include a detailed analysis for the Cash-Out transactions to understand the customer behavior and needs more. In order to detect the weakness points, which needs to be tackled to lower Cash-Out count to the minimum possible number. Zero should be your ultimate target!

Why Cash-Out should be considered as a poisoned apple?

Imagine Adam who Cashed-In 100$ and transfer it to his wife Diana, your system now collected 1$ as transfer fees and Diana’s wallet is now loaded with 99$. Diana went to the nearest agent and Cashed-Out 97$ after deducting 2$ fees, leaves you with 3$ profit.

This should be great, but you should consider that Diana was in need to purchase some books from the library, the librarian collected the money and went to the nearest restaurant for lunch, the restaurant guy went to the barber shop to get a hair cut, the barber visited the grocery to buy his weekly needs and so and so …

Lost opportunities:

You should be wondering now how much potential revenues you missed once you were focusing on the Cash-Out as your main revenue stream. It might be only 50 cents -0.5$- fees applied on purchase service but you should consider that there are unlimited purchase transactions around you and each new transaction will drop a penny in your pocket which means more and more profit.

Focus on your goals,

Cash-Out ends your system relation to the Cashed-Out amount and prohibits your from generating any extra revenue. It’s very risky ,, as Cash-Out service is a onetime terminal transaction, while purchases and financial trading will always be unlimited. A single Dollar might be traded million of times and the expected revenue will surpass the Cash-Out fees value regardless how large it was.

Conclusion,

  • Cash-Out is a poisoned apple and you should hear the audience shouting Don’t eat .. Don’t eat!
  • To limit the Cash-Out you must avail a robust and rich eco-system to support your customer needs and help them spending for their daily needs using your wallet service directly
  • Always balance between the services availed in your service and the Cash-Out fees
  • It not just a matter of count; services must touch real needs for your customers and should be a result of extensive market research and customer surveys
  • Fast, secure and easy should be considered in each new service implementation
  • Balance between day to day services and new fancy and innovative ideas, and make sure to develop in two parallel tracks

Photo Credit: http://d30fl32nd2baj9.cloudfront.net/bangla-media/2013/11/14/mobile-banking-640.jpg/BINARY/Mobile-Banking-640.jpg

Mobile Payment, Cash-In the passion fruit! [Last-Part 3]

In our previous articles “Cash-In the passion fruit [Part1] and [Part2]” we went through the Cash-In process and its impact on the mobile payment system.

Mobile payment Cash InAlso explored the different and possible scenarios and solutions you might follow to enhance your Cash-In process and drive your business to success and expand your customer base.

In conclusion, I can see that connecting your wallet solution to continued fund sources like linking your wallet to the customer bank or payroll account, your customer will suffer to refill his wallet each time. Customer will focus more on exploring your services and use it as the primary payment option. Please visit part one and two for more details “Cash-In the passion fruit [Part1] and [Part2]”.

Below should be a guideline to help you building your payment solution.

Channels,

  • Ensure to offer rich and convenient interface, mobile APP, web site, USSD, SMS, IVR, WAP site and so on
  • Selecting channels should differ from a region to another, many factors should be taken in consideration starting from the connectivity, the handset level, smart phone penetrations, population and many more
  • In general you may use two or three channels not more so you will have less confusion in your upgrades
  • Maintain the same experience if you will launch with more than one channel, and in your planned upgrades, it is a must to deliver the same upgrades across all channels all at a time
  • DO NOT allow full service functionality through Web or WAP interfaces. Enabling the internet solutions with all options will distract your customers, double your security and fraud risks and waive you from your main focus which is the mobile itself

Balances and silent customers,

  • Your main target is to increase the money flow. Resident balances or silent accounts should be your biggest nightmare
  • Never think about offering interests to your customers, this will not help you a step. Please refer to previous point
  • Your potential revenue and profit needs thousands transactions per day, therefore you have to focus on the money movement process and acquire new service regularly
  • Having a customer with 1M USD balance should not be a good sign at all, having a customer with 1M transaction is much more profitable for you
  • Adapt your wallet recycling policy for silent accounts to match the average customer behavior, it should not be so long to allow you doing the data cleansing and archiving process and not too short to a level frustrating your customers

Transactions,

  • Lower your fees to the lowest possible limits and keep some roam for promotions from time to time to increase the traffic
  • always look for new services to offer your customer, and always work on enhancing your service flows. An ideal service request should not take more than 5 seconds in average
  • You need to run multiple customer surveys and track the Cash-Out process to find out which service is missing in your service portfolio to be added to lower the Cash-Out transaction up to Zero if possible

Socialize,

  • History, analysis, reports and graphs. Think about offering 1+ years of historical data per user and setup top saving, top spending and other useful analysis to help your customers to control their spending and also tie them to your service
  • Customers likes to keep track of their spending, and they always prefer to have a social and rich reports will convenience the customer to pass all his financial transactions through your system to see all spending in a single report
  • Setup reminder for recurrent payments like Gas or Electricity bill and allow one step payment for such services
  • Allow manual entry to the financial report, where customer may enter extra spending to be accumulated in his monthly reports (i.e 10$ for Fancy book) this will be very welcomed from the customers and will allow you to see what should be your next integrated service

Finally, you have to pay attention to the Cash-In process and consider the process your customers will go through each time they need to refill their wallets and make sure that it s easy, fast and convenient.

Photo Credit: http://economictimes.indiatimes.com/photo/21155054.cms

Mobile Payment, Cash-In the passion fruit! [Part 2]

In the previous part , we went through the Cash-In process and it’s big impact on the mobile money service.

 

Mobile payment Cash InAlso discussed The payment logical filter, and proposed the first alternative to enhance your Cash-In process by offering a unique service that can’t be purchased using Credit cards or Cash, now I will carry on directly and proceed with the other possible alternatives.

 2- Promotions, Promotions and More Promotions!

One of the possible tricks to convenience the customer to use mobile wallet as payment method rather than traditional Credit Card or Cash, is to offer them a promotion, may be a certain discount or extra loyalty points. also the possibility to enter withdrawals and win some physical gifts or maybe they will be rewarded with some extra wallet balance to enforce them loop in the loop again, which should be considered as the optimum promotion style, as you will be trying to tie customer to your wallet more.

However this should work but it will not last, the sooner your promotion ends customers will slowly revert back to their traditional payment option, as Cash-In pain will come up again and the Logical filter test will miserably fail.

going with this option only works if you are really desperate concerning acquiring or attracting customers, but still you can go with this critical solution if you have professional sales and marketing teams, with communication and hot deals you may convenience your connected merchants to sponsor those promotions. This should attract customers and waive the added-on fees to the merchants side and grant you a good profit margin.

3- Pay it later!

Another approach is to allow customers to purchase via wallet with on credit option, this will generate you more traffic especially if your KYC bar is low. On the other hand this approach will dramatically increase the project risk factor.

You will be a victim for unlimited frauds, you will lose the main concept of online payment service, and you will find out that the solution has turned into a traditional bank system one by one. You will not need – and it won’t even make sense- to implement extra fancy or online solutions since your are not running in the online mode anymore.

However this approach is one of the possible scenarios to solve the Cash-In issue but I would vote for this as the worst approach, in the next approach and the upcoming” Do and Don’t article” I will explain why this methodology is not on my favorite list.

Still you can tweak it with a link with insurance companies, but as told before. Please avoid this way!

4- Back-end you wallet!

Personally I will always vote for this approach since it capitalize on the online concept, and it doesn’t force you to run endless promotions and shouldn’t change the risk level either in positive or negative way.

Back-end your wallet by linking it to a credit card number, bank account or any other saving account. And the ultimate is to back end your wallet to a payroll account. This will ensure a smooth and continued funding source of money to feed your wallet.

Once your fund source is granted, you have to focus on offering services to your customers, you will need to support your customer needs and try to lower the Cash-Out to the lowest possible count and put Zero Cash-Out as your major target.

And to make it work better you will need to follow the following rules,

  • Ensure to offer rich and convenient interface, mobile APP, web site, USSD, SMS, IVR, WAP site and so on, less is more and eventually 2 channels is always a good start to be increased later
  • Maintain the same experience if you will launch your wallet service with more than one channel, and in your planned upgrades, it’s a must to deliver the same upgrades across all channels all at a time
  • You main target is force the money flow and resident balances or else silent accounts would be your biggest nightmare
  • Your potential revenue and profit needs thousands transactions per day, therefore you have to focus on the money movement process and acquire new service regularly
  • … to be continued

In the next article,

We will focus on the fourth option and highlight more “Do and Don’t rules” to ensure a successful and continued payment service.

Photo Credit: http://upload.wikimedia.org/wikipedia/commons/2/22/Mobile_payment_03.JPG