Mobile payment is new and rapidly-adopting alternative payment method especially in Asia and Europe. Instead of paying with cash, check or credit cards, a consumer can use a mobile phone to pay for wide range of services and digital or hard goods.

One of the mobile payment systems in Malaysia is Mobile Money (MM Wallet). It is a PIN-based Mobile Payment Solution designed by Mobile Money International Sdn Bhd. It allows those registered users to pay for goods and services at anytime, anywhere using only a mobile phone coupled with a 6-digit security PIN via SMS. This gives the freedom to shoppers to buy products online and pay the merchant using mobile phone without being physically present at the store.

Other than Mobile Money, many other companies are also equipped with this concept to cater for their customer’s convenience, such as Maxis, Celcom and many more.

Potentials

There is tremendous promise in mobile telecommunication networks as an electronic payment channel since mobile phones are already in the hands of most Malaysians, with 88% of the Malaysian population subscribing to mobile phone services. Thus, Payments via text messaging have the potential to grow in importance.

Besides, there are immense opportunities to leverage on mobile phones to accelerate the migration to electronic payments, to widen the reach and appeal of electronic payment services, to deliver innovative mobile payment products that offer speed, simplicity and convenience at minimal cost for the public, as well as to provide an efficient and cost-effective method of delivering financial services even in the remote areas.

Also of significance is the high level of financial inclusion in Malaysia. When it comes to online selling, selecting a payment gateway is one of the major obstacles faced by the merchants in Malaysia. There are too few choices available. There is, therefore, a significant untapped and potentially lucrative market for mobile payment and banking services.

Consumers’ adoption strategies

Relative advantages of mobile payment systems

Mobile payments provide consumers with ubiquitous purchase possibilities, timely access to financial assets and an alternative to cash payments. Advantages of mobile payments compared with traditional payment instruments are thus likely to pertain to time and location independent purchase possibilities.

Compatibility

Compatibility captures the consistency between an innovation and the values, experiences, and needs of potential adopters. For payment systems, consumer ability to integrate them into their daily life is an important aspect of compatibility. The compatibility of mobile payments with consumers’ purchase transactions, habits, and preferences correspondingly influences the diffusion progress.

Complexity

Complexity and problems with usability have contributed to the low adoption of a variety of payment systems, including smart cards and mobile banking. Mobile payments are commonly expected to increase consumer convenience by reducing the need for coins and cash in small transactions and increasing the availability of purchase possibilities. Mobile technologies should be usable and user-friendly.

Network externalities and creation of critical mass

Payment systems exhibit network externalities as the value of a payment system to a single user increases when more users begin to use it. Consumer decision to adopt a payment system is therefore significantly affected by the amount of other consumers and merchants using it.

Costs

The cost of a payment transaction has a direct effect on consumer adoption if the cost is passed on to customers. As shoppers in electronic channels are attentive to price, the transaction costs of mobile payments should be low enough to make the total cost of the purchase competitive with physical world prices.

Payment system security and trust in payment systems providers

In a mobile environment, lack of consumer perceived security and trust in vendors and payment systems is one of the main barriers to electronic and mobile commerce transactions. The key requirements for secure financial transactions in electronic environment include confidentiality, data integrity, authentication, and non-repudiation. Other security factors important for consumer adoption are anonymity and privacy, which relate to use policies of customers’ personal information and purchase records.

Related links:

http://www.neowave.com.my/mobilemoney_overview.asp

http://project.hkkk.fi/helsinkimobility/papers/Mobile%20Applications_2_3.pdf