The challenge of, and solution for, secure mobile payments
Mobile payments technologies are defining the next generation of commerce. Today’s tech-savvy shoppers can choose how they pay for goods with apps that offer payment through mobile wallets, gift cards, credit/debit or stored value accounts. These emerging technologies are expected to increase in volume and value, with a 35 percent annual growth between 2012 and 2017, as stated by a 2013 Gartner report. A recent Nielsen report further confirms adoption is on the rise showing that 40 percent of mobile wallet users say mobile is now their primary mode of payment.
Retailers face several challenges in adopting these new technologies. For decades, retail payment transactions have been initiated by an in-store point-of-sale system that reaches out to the payment processor for authorization. With the emergence of mobile payments, customers can now initiate payments through cloud-based mobile applications that don’t require a POS transaction. Given this, store locations are faced with real obstacles in successfully managing the coming influx of cloud-initiated transactions. For obvious reasons, security considerations top the list, but practical impediments such as legacy POS system enablement are suppressing the adoption of these payment technologies.
One significant problem individual stores will face is how to account for the revenue from, and cost of, cloud-purchased goods sourced locally from their store site. Currently there are few affordable and secure solutions that connect the cloud transaction to the specific store site where the goods are bought; therefore, the reduced inventory cannot be reconciled with revenue generated at the specific store site. Unless this issue is resolved, there will be little adoption of mobile cloud to local POS payment applications. The stores will lose potential sales and cloud payment providers will fail to expand their market opportunity. Until the past few years, the cost and complexity of enablement alternatives has been high for both enterprises and cloud service providers. This has changed as more secure mobile payment options are being developed and offered for enterprise purchase.
A few companies, however, have formed to offer real solutions, providing secure and cost effective methods for cloud initiated payments [to obtain local POS authorization for the sale of goods from the store]. A customer can be inside the store and purchase the product from their smartphone and the specific store site receives the revenues to cover the cost of the product. These innovative solutions enable a new form of payment, which has the potential to increase store revenues.
Through their cloud-based Virtual Application Networks (VAN), such companies establish a secure connection from the cloud payment provider to the local store. A secure appliance terminates the VAN and integrates the connection into IP-based or legacy serial- interface-based POS systems. This allows mobile payment to be enabled without the cost of having to upgrade the POS system. Additionally, utilizing a secure cloud ensures that payment information will be delivered safely from the mobile cloud application to the POS system at the specific store site without jeopardizing the integrity of the Card Data Environment (CDE).
Cloud payment providers are critical in the process of enabling mobile payments and can provide greater customer value by doing so. Advanced mobile payment solutions offer cloud payment providers a simple, secure and cost effective platform to enable both these new cloud-initiated payments as well as traditional POS-initiated payments.
When seeking a new mobile payment solution, retailers should look for:
- a cost effective and secure platform
- simplification of PCI compliance efforts
- full network security improvement
- easy integration into existing systems
Any system chosen should securely aggregate all payment connections into redundant data center connections.
The consumer retail market is changing, being driven by ubiquitous mobile technology in the hands of connected consumers that want an easier and faster customer experience. Retailers must adapt their methods of enabling payment to those that attract connected buyers. Enabling these new mobile forms of payment will increase new revenue opportunities for all involved.
Greg Tennant Greg Tennant is Senior Vice President of Marketing and Strategy at Cybera, Inc. With more than 20 years of experience in the IT and telecommunications industries, Tennant is responsible for leading product development and marketing of Cybera’s cloud-based virtual application networking solutions. www