Nolan Jones is director of innovation at NIC Inc.
In October, Apple took away the final impediment to a future where credit cards no longer reside in our wallets, but instead live on our mobile phones.
With the introduction of its iPhone 6 models, Apple joined Android and Windows phones by including near-field communications chips, the technology that allows two NFC-enabled devices placed near other to exchange data.
Now that this mobile wallet technology is available on all major smartphone platforms, both private industry and the federal government are taking notice.
Until now, the cost of installing new pay terminals kept mobile phone payment platforms from wide adoption. This mindset, however, is changing quickly. NFC technology is far more secure than credit cards are, and the recent wide-scale, highly publicized data breaches will drive demand for a safer way to pay for goods and services. Consumers increasingly will expect the convenience mobile pay offers as well.
Retailers have further incentive to move to mobile pay by October 2015. At that time, American Express, Discover, Visa and MasterCard plan to impose penalties on those who don’t install payment terminals that accept contactless smart credit card payments and payments from smartphones with NFC chips.
As consumers get used to paying for their retail purchases with their phones, they’ll expect government to offer this payment method just as private industry does.
There’s plenty of potential for government use, including parks, DMV offices, schools and almost anywhere a government agency accepts credit cards. But federal agencies should ask seven important questions before they adopt mobile wallet technology:
1. Do we really need to think about this right now? The traditional wallets or purses people carry today – bulging with cash, credit cards and checkbooks – are going away. Mobile will surpass these payment methods. Federal agencies will be better off assessing the options and choosing and implementing their preferred mobile platforms now, while private industry is going through the same process, rather than falling behind the curve.
2. Does the service we provide lend itself to smartphone delivery? Mobile is a good tool for certain government services, including business registrations or various kinds of license renewals. It’s not the right delivery method, though, for services such as corporate income tax filings that require completion of lengthy forms. Before investing in a mobile payment solution, make sure the service you offer is one your constituents likely will want to access from a mobile device.
3. Who picks up the tab? With any payment system a federal agency considers, it’s important to understand what the true costs are. Mobile transactions always carry a fee, and you’ll need to determine whether your agency will accept the fee as a cost of doing business or pass it on to users. If you ask customers to cover the fee, how will you communicate this information to them?
4. How many payment systems will the agency accommodate? In addition to Apple Pay and other mobile platforms, Twitter plans to offer a payment system. Merchant Customer Exchange also will be a big player. This retailer consortium, which includes Walmart and Best Buy, will release its own mobile payment solution, called CurrentC. BitCoin, Dwolla and other contenders are emerging as well. Some technologies may allow agencies to partially offload risk, but you should evaluate each potential option based on how willing your users are to embrace it and how much it will cost to implement and maintain.
5. How will the agency get its money? Government services users traditionally have paid either by cash or by check, and financial rules dictate how quickly the agency receives the funds. Now, with so many possible merchant systems coming available, clarify how – and how quickly – a system you’re considering will deliver the money.
6. How can we make the system seamless? One goal for mobile checkout is to make the entire process easy and intuitive. The mobile application should walk the user through the process and keep everything as simple as possible. Minimizing data input will help users get through the transaction more quickly. Ideally, the payment process also should be integrated into the application so the user is not directed to a different site to make payment.
7. What will make mobile payment most efficient for our users? People who interact with government often need to complete multiple transactions, such as vehicle registrations, at one time. Legacy systems typically make users start at the beginning of the process for each transaction. Provide autofill options for completing forms and incorporate a “shopping cart” approach that allows users who are carrying out several transactions to pay for all of them at once.
The credit card industry has been moving toward mobile wallets for some time, but Apple Pay hastened the timeline. If you’re not already asking the questions above, don’t wait. In 2015, mobile payments will accelerate, and constituents will expect federal agencies to support these alternative payment options.