Mobile payment apps and digital wallets are getting popular given the times we live in. Indeed, In the age of internet-based banking and shopping, it is no wonder that today we see and use several e-payment systems for our daily transactions.

An electronic payment system, also known as an e-payment system, is a way of making transactions or paying for goods and services through the electronic medium, without the use of cash. It’s also called an online payment system.

There are many methods that come under the e-payment system. While credit and debit cards make it convenient for customers to make purchases in-store and online, they do not allow consumers to transfer cash between one another. With the ability to transfer funds on a person-to-person basis becoming more relevant and smartphones being commonplace, it is important that we take a close look at mobile payment apps today.

What is a Mobile Payment App and How Does It Work?

Mobile payment apps are often linked to mobile wallets, i.e. digital or ‘e-Wallets’ on the phone. These wallets basically let an individual carry out electronic transactions. Electronic transactions here mean buying items online using a smartphone. The app is thus a mobile wallet containing user’s bank/ debit and credit card information so that users can pay for goods and services digitally by using their mobile devices. The mobile wallet securely stores users’ payment information and passwords for several payment methods and websites.

Usually, the process is as follows:

For the first payment using the app, the user downloads the app, registers, feeds his/ her phone number, and the provider sends an SMS with a PIN which is entered by the user, thus authenticating the user’s mobile number. The user then shares his/ her credit card info or another payment method if necessary (not necessary if the account has already been added) and validates the payment. For subsequent payments, the user just has to re-enter the PIN to authenticate and validate payment.

Mobile payment apps can also run on contactless near-field communication (NFC). It is a set of communication protocols that allow two electronic devices, one of which is usually a portable device such as a smartphone, to establish communication by bringing them within 4 cm (11⁄2 inches) of each other. Not surprisingly, mobile payment apps such as Apple Pay, Samsung Pay and Google Pay use NFC and thus allow consumers to carry out electronic financial transactions.

Advantages and Disadvantages of mobile payment apps:

Advantages:

• Mobile payment apps are easy to use for consumers. Their simplified approach results in better usability and more utility for the customer.

• These apps also offer information encryption, which means that consumer data is protected by a private software code.

• Mobile payment apps are usually free to use for certain transactions, although there may be costs associated with other services.

• Mobile payment apps help you do away with the need to carry cash and issue change.

• Plus there are a number of benefits, discounts and rewards on offer. Typically, one also has access to multiple features in one app.

Disadvantages:

• Not all mobile payment apps support international transfers. This means that while your app works perfectly well in one country, it may not do so in another. So for frequent travellers, this may not be a very convenient mode of payment.

• Mobile payment apps by their very definition depend on online connectivity to be able to function. So using this app requires one to have a computer/ laptop or a smartphone with enough charge and a working Internet connection. In the absence of even one of the above things, transactions cannot take place. This is why they haven’t yet beaten credit and debit cards.

• Most banks have two-factor authentication which includes an OTP (One-Time Password). But for many mobile payment apps, this is not the case. So should you lose/ misplace your smartphone, then anybody can use your wallet money with your app; and if there is a password, there are lots of ways of cracking the password. So apps are not as secure as your debit or credit cards.

• The registration process on a mobile payment app may not be foolproof. For instance, a fraudulent user could register an app under a victim’s mobile number. The registration process can get overwhelmed due to the registration of a large number of users using automated bots.

• Other vulnerabilities include the fact that sensitive data like personal ID information and card information is stored in plain text form. Sensitive data is also transmitted over the network in plain text.

• Mobile payment apps can offer poor protection against reverse engineering which steals encryption keys and executes other implantation methods.

Mobile Payment Apps in the US

Apple Pay, Venmo, PayPal and Samsung Pay are some of the big names in the US. Of particular interest are apps that allow payment in stores. Android Pay, Apple Pay, LevelUp, and Samsung Pay are said to lead in this segment. At one point, Apple also claimed that its Apple Pay accounted for 90 percent of in-store contactless payments. LevelUp, for example, has provided good discounts at participating stores, but it is not as widely available in stores as the others. Samsung Pay stands out as it works with NFC, magnetic stripe and EMV (Europay, MasterCard and Visa) terminals for chip-based cards.

The MasterCard PayPass application too has been adopted by a number of vendors in the U.S. and worldwide. For example, PayPal app didn’t support direct NFC wireless payments like Android Pay and Apple Pay did but now it does. Cash App (earlier called Square Cash app), on the other hand, can’t be used for in-store purchases, but the service provides you with a debit card that you can use with any balance you’ve accrued in your Square Cash account from others paying you.

Mobile Payment Apps outside US

Indeed, mobile payment apps have caught on very well in Asia and even Africa. In India, the leading names in this field include Paytm, PayUMoney, Google Pay, BHIM UPI, MobiKwik and Citrus. In China, China UnionPay, WePay, Alipay are market leaders. Meanwhile, M-PESA has gained popularity in Kenya and Tanzania, PayPay in Korea.

Asia-Pacific accounts for a huge chunk of the mobile payment market due to high mobile penetration there. According to a MasterCard mobile shopping survey that was carried out between October to December 2015 and targeted 8500 adults aged 18–64 across 14 markets, China (with 45% of users), India (36.7% of users) and Singapore (23.3% of users) are the biggest adopters of digital wallets. Further analysis also revealed that 48.5% of consumers in these regions bought items using smartphones. Indian consumers are said to lead the way with 76.4% using a smartphone to make a purchase.

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