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IS 101 Case Study 4 E Commerce

The document discusses the rise of mobile payments and digital wallets, with Japan leading the way using near-field communication technology. Mobile payments have been slow to take off in the US due to credit card popularity and issues with customer trust and behavior change. Experiments with mobile wallets are underway using various technologies, but incentives and addressing security concerns will be important for consumer adoption.

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Jeremy Velasco
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12 views

IS 101 Case Study 4 E Commerce

The document discusses the rise of mobile payments and digital wallets, with Japan leading the way using near-field communication technology. Mobile payments have been slow to take off in the US due to credit card popularity and issues with customer trust and behavior change. Experiments with mobile wallets are underway using various technologies, but incentives and addressing security concerns will be important for consumer adoption.

Uploaded by

Jeremy Velasco
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Mobile Payments and the Digital Wallet

I n a country where cash is king and almost everyone owns a cell phone, Japan’s NTT Docomo led a major

drive into mobile payments and m-commerce. The mobile phone carrier pioneered the use of “near-field
communications” (NFC) chips inside its cell phones, enabling them to exchange data wirelessly over a few
centimeters. More than 56 million people subscribe to Docomo’s wireless voice network, and they can all pay for
their cappuccinos at participating stores by tapping their cell phone against a special terminal or just waving it
nearby.

When a customer taps the cell phone to pay, the expense is automatically logged into a digital expense report
and charged to the customer’s account. Called osaifu keitai in Japanese, the cell-phone wallet frees people from
carrying cash. Consumers use their cellphone wallets to buy subway, train, and airline tickets, and the phone’s
chip also serves as an electronic key to control access to buildings and homes. Cell-phone wallet holders can
check their balances, loyalty points, and purchasing history from the handset and receive promotional discounts.

In the United States, mobile payments have been slow to take off, partly because credit cards are so popular and
also trusted. The credit card industry builds in essential safeguards against fraud, and also offers incentives such
as cash advances, frequent flyer miles, or reward points. Switching to mobile payments would be a major change
in customer behavior.

Many mobile payment trials are underway, however, involving NFC chips, barcodes, QR Codes, or other
strategies. For example, Dunkin’ Donuts customers can use their Apple Passbook mobile wallet to purchase
coffee by letting an employee scan the pass on their phone, which is actually a QR Code.

While Apple may become a major player in the mobile payment industry, the company has had some slip-ups
that make customers wary. While waiting for his tech support appointment at a New York Apple store, one
customer decided to purchase some headphones. He used the Apple app to scan the barcode, and charged the
purchase to his iTunes account. Later, when he started to leave with his headphones in a bag, an employee
asked to see a receipt. He located the app on his smartphone, but then found the transaction had not completed.
Instead of letting him click the last button to confirm, the clerk called the police and the customer was arrested
for shoplifting.

In Japan, NTT Docomo had to take over a bank to build its osaifu keitai services, so it would have the financial
backbone to actually handle electronic payments. In the United States, though, the credit card companies or
other well-established payment services, such as Paypal, are likely to be major players or partners.

Mastercard, for example, unveiled its own version of a digital wallet in 2013, called PayPass. The technology
uses an NFC chip in a card, key fob, or smartphone, and users can use the mobile payment feature at
participating retailers.

Consumers will need more incentives to try out any of these new services, and they must develop the kind of
trust they already have in credit cards, debit cards, checks, and cash. Convenience is one incentive, but creative
retailers can tap other features that tie mobile phones to purchasing. Teen clothing chain Aeropostale, for
instance, offered an app that let customers choose what music the store would play. The teens hung around the
store for 30 minutes or more to hear their selection. The long wait offered plenty of time to shop, and the company
learned a great deal about their customers’ music preferences.

As mobile payment experiments play out, and technologies like NFC become more widespread, those lines at
checkout counters may get shorter and shorter. Leather wallets stuffed with credit cards, loyalty cards, photos,
and cash may become extinct.
Discussion Questions

1. What are the potential benefits of this technology for consumers? What are the potential benefits for
retailers?
2. What are the risks for consumers and retailers? What are some ways that these risks could be
overcome?
3. How could this technology impact the telecommunications and consumer banking industries?

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