The Blockchain method might be a much more sophisticated alternative, but mobile payments are becoming more dominant in the world of financial technology due to its familiarity to mobile users.
Considered a type of electronic money, mobile payments aim to replace the limitations of cash. Since the invention of the card, whether with a chip or a magnetic strip, we have relied heavily on its use for decades. But as smartphones evolved into a necessity, they have now added themselves to the existing payment methods that have always been available to us.
But mobile payments cover several aspects of payments, and its many service providers offer varying service tiers as wells. To understand the overarching idea of mobile payments, we must look at their core functionalities, which are broken down into the following 4 groups.
1. Virtual Credit Card
Virtual credit card providers utilize smartphones as virtual credit cards that can be used to make payments like a physical credit card. They are refilled by drawing credit directly from your credit card account. The process of obtaining a card, specifying your credit limits and paying off credit card debts is still under the issuing financial institution’s authorization.
Samsung Pay is currently the only vendor of virtual credit cards in Thailand. Overseas competitors include Apple Pay and Android Pay, which have yet to enter the Thai market.
Users can communicate between their smartphones and credit card readers via near field communication (NFCs), allowing for peer-to-peer communication over radio waves. Because not all card readers are NFC compatible, virtual credit cards are still very limited in their functionality. But an exception is Samsung’s smartphones, which also contain an emitter that sends electromagnetic waves to user credit card’s magnetic strips. This allows Samsung Pay to work with virtually any credit card reader in Thailand, though the likelihood than a vendor will accept this kind of non-physical payment would be entirely up to them. This gives the Samsung Pay an advantage over its competitors.
This magnetic communication is still limited to only Samsung. Because of Thailand’s low user base, coupled with Samsung being the only provider in Thailand, Thai Apple Pay and Android Pay users do not exist yet.
2. Mobile wallets
Mobile wallets are what its name suggests: a mobile smartphone that acts as a wallet. You can add money to this virtual wallet the same way you would put cash into your actual wallet.
As the most widely available mobile payment option, mobile wallets have the most service providers including True Money, AIS, mPay, AirPay, PaySocial, and Rabbit LINE Pay.
Noticeably, businesses that utilize mobile wallets usually begin by letting customers pay the company in “credits” before using the credits to purchase goods and services. Examples include mobile networks (AIS, dtac, True), online gaming outlets like Garena’s AirPay, and utility service providers like the Rabbit LINE Pay, which is tied to the BTS’ Rabbit Card. These businesses generally have an established customer base, making it easier to allocate money in their credit system to the virtual mobile wallet.
Encouraging vendors to accept mobile wallet payments is the biggest challenge for mobile wallet providers. Building relationships with vendors is an important step to encouraging consumers to become comfortable with using mobile wallets.
There has been a rise in online transactions through mobile wallet payments, especially for paying utility, credit and insurance bills, but offline payments, especially at big chain businesses like McDonald’s and 7-Eleven are still limited.
China is epitomizing the broad spectrum of mobile wallet functionality with service providers like Alibaba’s Alipay and Tencent’s WeChat Pay, which means no more wallet carrying for users. More Chinese users are turning to these services as they are becoming increasingly popular.
Thai mobile wallet services face an issue of expanding user channels. TrueMoney’s attempts at the WeCard, through a partnership with MasterCard, allows users to pay online just like a real debit card, but Thai service providers still have a long way to go to get as many Thais into mobile wallets as the Chinese do.
Due to their customers’ pre-existing deposits, banks have a leg up in terms of transferring deposited money into their mobile payment systems. The breezy process has made mobile banking apps extremely popular.
Although payments made through mobile banking apps don’t go always go through the payment gateway, they are a form of peer-to-peer transfer, especially when making purchases through small businesses. From the consumer’s perspective, there is no difference between paying through a bank’s mobile banking app or paying directly to a vendor, as the vendor still receives money no matter what. An increasing number of flea market vendors in Thailand now accept payments through banking apps.
The recent arrival of PromptPay has also largely contributed mobile banking’s accessibility. Senders no longer have to fill in the receiver’s bank account into the app. The only requirement is the receiver’s phone number, and they’re all good to go.
Gift cards are very similar to mobile wallets. You refill with credits, but they are only usable at the issuing business’ stores.
The Starbucks Card is a great example of a gift card, which are only applicable at Starbucks stores. But as the largest coffee chain in the world, and with such a large customer base who have the Starbucks card, the Wall Street Journal estimated in 2016 that Starbucks may have up to $1.2 billion loaded onto its cards by users in the United States. This is even more than the total amount of deposits at smaller financial institutions.
Many businesses like Dunkin’ Donuts and Walmart also utilize gift cards. Businesses in Thailand has yet to gain that traction, with Starbucks being the only chain in Thailand offering this payment option.
Although the mobile payment market in Thailand is still in its infancy, it would be interesting to see what changes will take place.