Mobile Payment Business Models

By Gary Kim August 11, 2011

There are at least a half dozen (and possibly more) business models suitable to a mobile payment services or applications. But most observers would agree that nearly all can be grouped into some four or five basic variants. 

In some cases that would include retail mobile payments where a mobile device replaces the credit or debit card. Then there are mobile payments to buy digital or virtual goods. 

Peer-to-peer money transfers might be a third category. Then there are a range of “mobile banking” applications where the business model might be more indirect. “Mobile wallet” models typically are seen as a distinct category as well, primarily since the “wallet” approach creates revenue opportunities that are distinct from the “fee for transaction” revenue model. 


Online payments using a mobile device sometimes are considered a separate business as well. Some might see a variety of “stored value” or “mobile top-up” revenue models to be a distinct class as well. Read more here.

Some would say there are four broad models. Others might say there are five models.Generally speaking, observers who might opt for a five model classification will put “payment” models into four buckets, while “mobile wallet” gets put into a fifth category. 

And some would say the models differ based on which ecosystem participant is dominant or central to the model. Read more.

Alistair Fairweather, Digital Platforms Manager for the Mail & Guardian Online, uses a four-category analogy.The first approach is to enable mobile phones as payment terminals, he argues. That’s what Square does, allowing smart phones to accept credit card payments, anywhere, at any time. Read more here.

Another approach is to use a mobile as a replacement for a credit card or debit cards. Much of the hope revolves around use of near field communications to allow mobiles to communicate with payment terminals, but there are perhaps dozens of other possible communication methods. Whether the mobile service account is the source of stored value or whether the mobile is linked to a user’s debit, credit or bank accounts, this is the way most people tend to view “mobile payments.”

But not all mobile payments interest is focused on what users can do when paying for goods or services at a retail location. There is a large, and apparently growing need to transfer money between people, using only a mobile device, or allowing people to use their mobiles to pay bills, such as utility bills, transportation or education bills. That is what drives growing launches of mobile peer-to-peer mobile payments services such as M-Pesa.

A related approach is to use stored value or prepaid accounts of some sort for retail payments. The analogy is a gift card, which is pre-loaded with a certain amount of money a user can spend, so long as the retailer is equipped to handle the transaction. It will be quite familiar to most consumers who now buy prepaid airtime for their mobile devices, for example.Fairweather doesn’t specifically mention it as a “payment” system, but one other obvious revenue model is linking a mobile payment system to mobile advertising and promotion, loyalty accounts or offers of various types. The revenue then does not flow directly from the payment transaction, but from the value of advertising, marketing, incremental retail traffic or continued customer loyalty that results in incremental purchases.
Gary Kim is a contributing editor for TechZone360. To read more of Gary’s articles, please visit his columnist page.

Edited by Rich Steeves

Contributing Editor

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