Wallets in the cloud

The focus over the last few years with elec­tron­ic pay­ments has been the devel­op­ment of con­tact­less sys­tems. NFC (near-field com­mu­ni­ca­tion) is avail­able in some smart­phones, but is far from wide­spread. Shops and stores already set up for chip and PIN are mov­ing to offer NFC as a pay­ment option, if very slow­ly.

The dis­ad­van­tage, of course, with phone-based pay­ments is the poten­tial loss of the phone itself. As cred­it or deb­it card details are stored on the phone, los­ing it would be much the same as los­ing a wal­let.

Cloud-based sys­tems, such as Pay­Pal, Google Wal­let and Telefonica’s 02 Wal­let, offer next-gen­er­a­tion pay­ment plat­forms with fast check out for con­sumers when using bricks-and-mor­tar stores as well as when shop­ping online. And with the low cost of the infra­struc­ture to sup­port cloud pay­ments, busi­ness­es are increas­ing­ly find­ing this pay­ment chan­nel attrac­tive.

Ken Deveaux, glob­al head of chan­nels and dis­tri­b­u­tion at RBS Inter­na­tion­al Bank­ing, says: “By lever­ag­ing appli­ca­tions based in the cloud, com­pa­nies will be able to access ser­vices and infor­ma­tion that will make the deliv­ery and exe­cu­tion of pay­ments more effi­cient and less man­u­al. The cloud will also make it eas­i­er for buy­ers and sell­ers to exchange infor­ma­tion, from an ini­tial inquiry to a pur­chase order and invoice, and ulti­mate­ly to a pay­ment. This ben­e­fits indi­vid­ual con­sumers, large cor­po­ra­tions and every­one in between.”

As retail­ers become increas­ing­ly mul­ti­chan­nel, many of the process­es need­ed to sup­port pay­ments will be host­ed in the cloud, mean­ing it will evolve to become the glue that holds every­thing togeth­er

Mov­ing pay­ments to the cloud resolves some of the issues with NFC. “We’re see­ing a sig­nif­i­cant mar­ket demand for com­plete­ly fric­tion­less and seam­less pay­ment solu­tions,” says Ste­fan Jeschon­nek, co-founder and chief mar­ket­ing offi­cer of SumUp. “In-app pay­ments will be a major con­trib­u­tor to dri­ve the cloud-based pay­ment sec­tor.”

Kurt Hager­man, at secure cloud host­ing com­pa­ny Fire­Host, adds: “The real issue is one of improv­ing the secu­ri­ty found in these appli­ca­tions via real mul­ti­fac­tor authen­ti­ca­tion and then edu­cat­ing con­sumers on the improved secu­ri­ty. As with the adop­tion of any new tech­nol­o­gy, there is a ramp-up peri­od for wide­spread adop­tion.”

What is impor­tant for cloud-based pay­ments to become wide­spread and pop­u­lar is that they must be uni­ver­sal. A walled-gar­den approach will not be attrac­tive to con­sumers who would be locked into one ser­vice that is per­haps linked to their smart­phone sup­pli­er – an approach that some fear could hap­pen if Apple were to ever include NFC capa­bil­i­ty in their iPhones. As cash is uni­ver­sal­ly accept­able in the high street and cred­it cards are uni­ver­sal online, the cloud must be equal­ly applic­a­ble to both with no restric­tions on where and how pay­ments can be made.

Col­in Swain, head of prod­uct strat­e­gy and insight at the Kalixa Group, says: “One of the most fun­da­men­tal impacts the cloud could have on pay­ments relates to the intro­duc­tion of new forms of cur­ren­cy. The cloud, pay­ments and com­merce are all glob­al; how­ev­er, many con­sumers and mer­chants still deal in only one or two cur­ren­cies when pay­ing. Ven­tures such as Bit­coin could fun­da­men­tal­ly change how we trade in the future.”

What is clear is that for a cloud-based pay­ment sys­tem to work effi­cient­ly and secure­ly, your bank, card sup­pli­er, mobile net­work and all the retail­ers you buy from have to work togeth­er to build inte­grat­ed plat­forms. The Isis ini­tia­tive from AT&T, T‑Mobile and Ver­i­zon Wire­less is show­ing the way, but these ser­vices are nascent to say the least. How­ev­er, Wal-Mart, Best Buy and 7‑Eleven will roll out their own cloud mobile pay­ments to their cus­tomers this year.

As con­sumers increas­ing­ly move to mul­ti­chan­nel pur­chas­ing, they want a pay­ment mech­a­nism that is also flex­i­ble enough to enable them to seam­less­ly move from the high street to online, with many embrac­ing the con­ve­nience that shop­ping with their smart­phone now offers.

Raja Ray, direc­tor of solu­tions at Ver­i­Fone, says: “The cloud won’t impact the ‘face’ of pay­ments as much as it will the back-end. More and more con­sumers want to pay across mul­ti­ple chan­nels. Yet, regard­less of whether they are pay­ing in-store or via their tablet, they expect a con­sis­tent expe­ri­ence. As such, it makes sense that, as retail­ers become increas­ing­ly mul­ti­chan­nel, many of the process­es need­ed to sup­port pay­ments will be host­ed in the cloud, mean­ing it will evolve to become the glue that holds every­thing togeth­er.”

Accord­ing to a study by ACI World­wide Glob­al­ly, near­ly 25 per cent of con­sumers can be clas­si­fied as “smart­phonat­ics” or those who are more will­ing than oth­ers to exper­i­ment with dif­fer­ent approach­es to mobile pay­ments. With Juniper Research fore­cast­ing that the mobile pay­ment mar­ket will reach a val­ue of $670 bil­lion by 2015, the cloud-based pay­ments mar­ket is accel­er­at­ing.

At the moment, with a focus on mobile pay­ments, NFC seems to have the edge, as the mobile net­works with their smart­phone part­ners look to roll it out to a wider audi­ence. Per­haps Google have already giv­en us a glimpse of the future with the immi­nent arrival of Glass in which a wear­able tech­nol­o­gy can link to Google’s Wal­let pay­ment plat­form. You sim­ply tell your Google Glass to make a pay­ment.

And with lit­tle in the way of new pay­ment infra­struc­ture need­ed for cloud pay­ments, inno­v­a­tive point-of-sale ini­tia­tives and the tsuna­mi of con­sumers buy­ing online, cloud pay­ment sys­tems look set to be the future of your wal­let.