According to the Mobile Payment Forum, mobile payments are the transactions with a monetary value that is conducted through a mobile telecommunications network through diverse mobile users devices, such as cellular telephones, smart phones or PDAs, and mobile terminals. Mobile payment is a transfer of funds in return for goods or services in which a mobile device is functionally involved in executing and confirming payment. The payer can be standing at a POS or be interacting with a merchant located somewhere else. Mobile payment systems enable customers to purchase and pay for goods or services via mobile phones. Here, each mobile phone is used as the personal payment tool in connection with the remote sales. Payments can take place far away from both the recipient and the bank. This chapter gives an overview of mobile payments.
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The growth in wireless technology increases the number of mobile device users and gives pace to the rapid development of e-commerce conducted with these devices. The new type of e-commerce transactions, conducted through mobile devices using wireless telecommunications network and other wired e-commerce technologies, is called mobile commerce, increasingly known as mobile e-commerce or m-commerce. Mobile commerce enables a new mode of information exchange and purchases, and it presents an unexplored domain. To customers, it represents convenience; merchants associate it with a huge earning potential; service providers view it as a large unexplored market; governments look it as a viable and highly productive connection with their constituents. In short, mobile commerce promises many more alluring market opportunities than traditional e-commerce. M-Commerce is an area arising from the combination of electronic commerce with emerging mobile and pervasive computing technology.
The most important application of mobile Commerce is Mobile payments. These services makes a mobile device to act as a business tool replacing bank, ATM, and credit cards by letting a user conduct financial transactions with mobile money. A mobile user attempts to purchase goods or services from a business or service provider, which then contacts a trusted third party, the wireless service provider, or a financial institution to authenticate the user and amount of purchase. Once approved, a mobile payment can be made and the purchase is completed. The corresponding funds can then be withdrawn from user’s m-wallet, charged to user’s phone bill, or subtracted from user’s bank account. Alternatively, the user could pay using mobile money provided to him by another user or a third party mobile money provider. Mobile money can be moved freely among users either by using a local area wireless network or by using the wireless service provider’s network. Several groups are working on mobile payments, including PayCircle that is established by HP, Lucent, Oracle, Sun, and Siemens. Mobile financial transactions require a strong level of security support. Although, security features have been added in mobile middleware such as WAP for financial applications, wireless PKI (Public Key Infrastructure), a system to manage keys and certificates, is used to authenticate and obtain digital signatures from mobile users. The payment system is an application responsible for increase in competitive advantage in organizations. Researchers are interestingly working in the area of mobile payments as it is multidisciplinary in nature and works in collaboration with different areas like telecommunications, wireless networking, mobile computing and security.