Mobile payment race
A young Lithuanian company has set itself quite ambitious plans. WoraPay team decided to shake up mobile payments which have been hotly discussed by the media for several years now. CEO and co-founder of WoraPay Aurimas Bakas has kindly agreed to chat with us.
BF: Tell me, for several years everyone has been talking about mobile payments, but nothing is happening in real life, why, in your opinion, is that?
AB: The situation is quite complicated. Banks hold and distribute money all over the world and they have the field’s monopoly. So, first of all, in order for the mobile payments to reach consumers, banks have to show some initiative.
BF: But why other market players can’t do this as Square or PayPal did?
AB: I see two challenges here. First of all, all those new systems are pre-paid, that is, the user has to add some money to the account in order to use them. Second, money addition changes consumer behavior, and that’s a very complicated and costly delight.
BF: Yet, now banks create mobile applications and there’s more and more of them each day. Wouldn’t a bank’s app be sufficient for mobile payments to become reality?
AB: It’s wonderful that banks have finally started to create what’s needed by the consumers - that’s quite an extraordinary phenomenon in the financial sector. Though, the greatest challenge is the contents of the application. The paradox is – 99% of the content of the banks’ apps is just transferred branch services. Banks, sort of, became mobile, but you can only find existent services there. At a maximum, you can check your account balance or make a transfer using the bank’s app. And, of course, find a branch or an ATM. According to the banks’ statistics, the app is used 2-3 times per month on average, and we want to increase this number to 4-5 times per day.
BF: Don’t you think that your goal to offer a new payment ecosystem to the banks is quite an ambitious goal? What reactions do you get from the banks’ side?
AB: We understood quite fast that it’s very difficult to change consumer behavior if you want to do it quick and at a large scope. We’ve decided to come to the banks’ rescue and create a system, without changing much, so the banks’ customers could pay via smart phone using their bank’s apps. The banks’ reactions were a huge surprise to us. They received the news very enthusiastically and already this autumn some regional banks will offer their clients the possibility to make every-day payments using their smart phones.
BF: Could you please clarify what you have in mind when saying “every-day payments”?
AB: First of all, retail payments – in cafes, gas stations or stores. The ecosystem we’ve created, which is integrated with the retailers’ cash register systems, will allow the consumer to pay for food, fuel or merchandise using the bank’s app, and the retailer will receive money online.
BF: But this can also be done using credit/debit cards. What’s the benefit for the consumer?
AB: Credit/debit card payments aren’t mobile payments, are they? The system is also conjunct with loyalty cards and user’s discount is automatically applied. Another service that’s much awaited by the small retailers is mobile POS (Point of Sales). Now thousands of small and mobile retailers can’t or don’t want to attach themselves to bank card readers. Sometimes this is done because of cost, sometimes fear, sometimes banks don’t issue them as they evaluate credit risks (the bank is responsible for the retailer if he/she will accept payment, but won’t supply the merchandise). We offer banks the possibility to accept payments via smart phone. This expands the retailer circle greatly and the service is much awaited in the market. Just look at Square in the U.S. – it’s beating all records as the market has huge demand for this type of services.
BF: You’ve surprised me. What other news could you reveal to us?
AB: Payments at e-stores (mobile stores) is yet another challenge to the banks. The present ecosystem when one can only pay using a card is very risky. Card networks spend millions of dollars for data protections and this makes the whole payment system very careful and very expensive. After all, it’s said that even your puppy can use your credit card behind the computer screen, as the retailer can’t see whom he/she’s selling to.
BF: And how are you planning to solve this problem?
AB: We’ll simply change the client’s ID from one’s card to phone number. Even when somebody knows your phone number, it’s not a problem, as you have your phone with you and nobody else, apart from you, can make the payment. Even if you lose your phone, you can block your card as usual through your mobile operator. If you hadn’t time to do this, it’s still impossible to make the payment as the system is protected by additional PIN codes. Just imagine that your kid is buying a sword in a virtual game and enters your phone number for payment. It doesn’t matter what part of the world you’re in, you receive a simple request in your mobile and confirm or deny it.
BF: So using this logic, it’s totally real to transfer money to my friend’s phone number?
AB: That’s yet another innovation which will be available for testing this year. After all, it’s quite difficult to remember the IBAN (international bank account number) and if you miss just one digit, the money will go to a different person. When choosing a phone number from your smart phone address book and simply entering a sum is a completely different delight. You don’t even have to know your friend’s account number – he/she will receive the money directly to his/hers bank account – we take care of this.
BF: It all seems as such a far-way future to me, I can’t believe it’s so close. So what should banks do in order to provide these services to the consumers ASAP? I can’t wait to try them out!
AB: We have the whole infrastructure and very simple instructions ready. Banks can easily install these functions using API (application programming interface) into their mobile apps and supply their clients with mobile payments here and now. If it still seems impossible, please write me an email (BF: email@example.com) and I’ll happily provide you more detailed information or demonstrate how all works live.
BF: And what about the clients’ data safety?
AB: Client’s data is processed by the bank, we don’t receive this data. We only transfer payment instructions to the bank and receive money. The safety is guaranteed by the bank.
BF: Thank you for wonderful news.
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