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.