Payments in mobile gaming: the holy grail for m-gaming companies
Many consider the entire area of payment processing and m-commerce to be the ‘holy grail’ of mobile gambling, and it is hard to argue against this supposition. Along with the issue of spontaneity (which is critical from the customer’s perspective) lie the charges associated with each method that the gaming operator must bear.
Broadly speaking, there is an inverse correlation between payment processing costs to the operator and convenience to the customer. Premium SMS and Payforit, for instance, allow simple fast depositing, but can charge the operator prohibitively expensive fees.
On the other hand, credit and debit cards offer the lowest fee structures but entering credit card details with Credit Card Verification (CCV), validity date, name and address of card holder, then a 3D Secure redirect to Verified By Visa (VBV) and MasterCard Secure Code (MSC) all for a simple transaction, can be complicated at the customer end.
Convenience and usability is of far more importance as the screen size of the mobile phone and the tools available for the user to enter data into a screen dialogue, is far more limited on a mobile device. Designing a user interface and functionality adapted to the characteristics of mobile devices is critical and some best practice suggestions include:
- Keep the payment process as simple as possible,
- Never ask a repeat customer to enter information twice,
- Only choose solutions that are feasible for mobile devices. Operators should decide very carefully which deposit options are actually practical for mobiles phones. Methods that go through hosted pages, proxies and a number of redirects will lead to an unacceptable number of abandoned transactions,
- Ensure a frictionless/seamless service for the consumer. This has required many or most of today’s e-payment providers to re-engineer their services to reach an acceptable mobile user experience,
- Streamlined and failure-tolerant deposit and withdrawal processes are of particular importance in the mobile space. Asynchronous communication and automated recovery of transactions when the mobile connection breaks down are essential technical requirements of a mobile payment solution. Such challenges need to be taken into consideration by operators when designing their mobile ecosystem and when choosing their designated mobile payment partner,
- Invest time and effort in managing security as it is an issue that affects both the operator and customer. Risk management for the operator is harder on the mobile channel as anti-fraud tools are not as well evolved as they are on the desktop internet and mobile devices bring new complexities into play.
For a long time, mobile wallets were considered a solution without a problem. Supply wasn’t the key issue, but there was a lack of consumer demand. The initial market adoption of m-payments was slow and sporadic due to technological challenges, limited standardisation, fragmented commercial efforts, and most importantly, and the lack of a sustainable business model.
M-payments are currently at a nascent stage but the ubiquity of mobile devices in almost every region of the world, regardless of economic status, points to a time, not too far out in the future, when it will be difficult to distinguish between online and mobile payments. Wireless broadband is already becoming widely available in many markets and industry observers see fast and inexpensive anytime-anywhere mobile online connectivity as the obvious next step.
For mobile payments to be normalised there are several factors that come into play:
- Must add value to the consumer and offer a compelling reason to change their habits from cash and credit/debit cards,
- Stable ecosystem and scalability of solutions,
- Standardisation of solutions,
- Elimination of confusion (operators, providers and consumers),
- Enabled handsets,
- Consumer awareness and trust,
- Convenience and simplicity,
- Acceptable operator costs,
- Positive experiences, feedback and reinforcement from consumers,
- Critical mass of users and ubiquity of mobile payment solutions,
- Mobile commerce must be integrated with other forms of payment,
- Mobile commerce must be iron-clad secure.
Bill Gates is quoted as saying, “banking is essential. Banks are not”. This has never been truer than at this point time when we consider the explosive growth of alternative payment mechanisms. WorldPay data shows that, today, alternative payment mechanisms account for €165 billion of global e-commerce transactions, representing 22% of total transactional value, and they are expected to enjoy a Compound Annual Growth Rate (CAGR) of 13% in the run up to 2015.
As the overall e-commerce market near doubles from a value of €755 billion today to an expected €1,460 billion in 2015, alternatives will account for a significant share of that growth.
The same dataset from WorldPay flags that by 2015, growth of alternatives within e-commerce will outstrip that of cards, particularly in developing economies such as Brazil and India where the use of cards is much lower. This doesn’t mean that card payments will dwindle; it’s just that alternatives will grow faster as these mechanisms are popular in some the world’s fastest growing economies.
Credit cards have traditionally been the “go-to” payment method for online purchases, but a study from Javelin Strategy & Research found that 60% of merchants rate alternative payments as a priority. Alternative payment methods are becoming a necessity for global e-commerce and, while the preference of alternative options varies from region to region, the presence of these alternatives remains a vital part of any customer-facing offering.
There is no standard definition of what is meant by alternative payments. In general, it is considered to be any non-card payment type. These alternatives comprise a large variety of discreet schemes. It is estimated that there are more than 230 schemes in existence on a local or global level.
However, WorldPay has found that the top 25 schemes account for over 80% of transaction value. This would include offerings such as PayPal, Alipay, iDEAL and ELV.
Size of Mobile Payments Market
There is, quite literally, no end to the amount of analyst data projecting the size of the global mobile payments market – much of it somewhat contradictory. Data from key analysts and research houses that are widely quoted within the industry is detailed below.
- Juniper Research: the value of mobile commerce transactions conducted via mobile handsets and tablets will exceed $3.2 trillion by 2017, up from $1.5 trillion this year.
- Gartner: long term viewpoint is that mobile transaction volume and value will average 42% annual growth between 2011 and 2016, and they forecast a market worth $617 billion with 448 million users by 2016.
- Business Intelligence: by 2017, the total value of global offline transactions facilitated by mobile devices will reach about $1.5 trillion, up from $120 billion in 2012. The number of mobile payments users globally is set to explode as well. By 2017, the total consumer user-base will climb past the 500 million mark. That will be more than a five-fold increase from the less than 75 million consumers who used mobile payments at year-end 2012.
Adyen: Their quarterly Global Mobile Payments Index reveals worldwide mobile payments transaction growth of 75% over the past ten months from 8.2% in June 2012 to 13.8 % in April 2013), with Europe leading the charge with 15.3% of all payments conducted via mobile device, followed by Asia (12.4%) and North America (11.2%)
Adyen’s Index also found that tablet devices (both iPad and Android) saw a combined 5% increase in mobile transactions over the past 10 months (from 48% to 53%).
With the exception of North America, where 58% of all mobile transactions are carried out using a smartphone, the iPad continues to be the dominant platform for mobile transactions around the world. The device now accounts for 6.6% of total worldwide transactions through April 2013 (up from 3.6% in June 2012) for a total 10-month growth of nearly 83%. iPhone users accounted for 4.4% of total transactions, up from 3.1 % in June 2012 (+42% growth). Transactions from Android phones nearly doubled from 1.1% to 2%, while use of Android tablets more than doubled from 0.3% to 0.7% of total transactions.
VocaLink: UK-based research found that the demographic breakdown of mobile payment users showed a skew toward men and especially those in the 16-to-34 age group. Twenty-three % of male internet users reported using mobile payments vs. 18% of females. And a substantial 41% of 16- to 24-year-olds and 35% of 25- to 34-year-olds also said they made mobile payments.
Overall, mobile payments reached one out of five surveyed internet users in the UK. When it came to types of mobile apps used to make payments, PayPal Mobile was the most popular among UK mobile payment users, at 64%. But mobile banking apps followed, at 40%, showing that mobile banking continues to be an entry point for mobile payments.