The Future of Mobile Payments

Cash money out – phones in? As consumers remain tethered to their phones, the growth of mobile wallets has exploded, multiplying faster than bunnies in springtime. But just like any overcrowded forest, only the strong survive. With so many options – including the opportunity to create their own types of mobile payments – businesses are struggling to figure out what’s a passing fad and what’s the real deal.

When it comes to the future of mobile payments, there are several factors in play – the actual payment technologies (i.e., mobile wallets and payment platforms); disruption from innovations like AI/ML and blockchain; and of course, the determining factor in all of the above – consumer adoption and preferences. Let’s take a look the major factors at play and how consumers will drive the future of mobile payments.

Mo’ Payments, Mo’ Problems

First, let’s start with payment technologies. When you look at the current state of mobile wallets, it seems like every consumer-facing company has hopped on board – from retailers like Starbucks to tech giants like Apple and PayPal. But according to research from this year’s Mobile Payments & Fraud Survey, merchants are still hesitant, with the exception of PayPal, in accepting mobile wallets as a payment option – with only 22% of merchants accepting them. The likely reason for this? The majority of merchants (70%) anticipate consumer mass adoption of these mobile wallets is still two to five years away, therefore feeling little urgency to add wallets to their payment roster right away.

So what does the future of wallets look like? As with any industry, we’ll continue to see the proliferation of mobile wallet options for several years to come, followed by a collapse. Following this collapse, which will likely entail various mergers, a clear winner will emerge. And the deciding factor behind the winner? That belongs to the consumer. Over the next few years, consumers, driven in large part by the influential millennial generation, will have to make a decision, and whatever their preference is will reign supreme.

Innovations: Building Block(chain)s

Another factor in the future of mobile payments is incorporating new innovations. While AI/ML have been on the rise for years, and have a significant role in automating and improving certain processes, there is also a fear factor associated with these technologies.

However, I believe that AI will instead improve jobs where machine learning is used and empower employees to create better products and make better decisions. It should be noted that it can be detrimental to rely solely on AI. Artificial intelligence and machine learning should go hand in hand with human oversight and review, making the most of its capabilities of sifting through and analyzing large amounts of data that would not be possible via the human eye.

While artificial Intelligence and machine learning have already dominated the tech space, other technologies like blockchain are not quite as common yet but have the potential to have a major impact in the future. First created for use in Bitcoin, the newest tech buzzword is a digital ledger in which transactions are recorded chronologically and publicly. The buzz around blockchain has been growing louder, especially when it comes to mobile payments. A recent Juniper Research study found that 57% of firms have either deployed or are testing blockchain technology to facilitate financial transactions.

In general, it’s not as easy to incorporate new pieces of technology into legacy products. And most companies aren’t willing to scrap something that’s worked well for years to take a chance on a new piece of technology. Add to that the fact that most companies don’t have a dedicated R&D department, which leaves them limited options when it comes to capitalizing on the latest buzz word in the industry. For example, the ride shares of the world, which disrupted the long-standing taxi industry. The only difference in the new model is the addition of a mobile wallet – no money exchanges hands. That would have required just one addition for taxi companies, and ride shares would not have cannibalized the industry.

Consumers: Sharing Rides, Driving Adoption

But, as we’ve seen with the swift rise of ride shares and other disruptive technologies, eventually companies risk falling behind the times if they don’t keep pace with highly-adopted technologies. Again, let’s look at, blockchain. While it may not be commonplace now, there’s a chance that it will be several years, even decades, down the road. Blockchain has all of the components to revolutionize the foundation of several industries, including mobile payments as a whole, as it has the potential to impact security, P2P lending, bank access, and a number of other payments-related processes.

The future of banking, legal, and other professions that rely on shared documents or content could surely benefit from the immediate validation and limited friction that exists with blockchain technology. But of course, companies must weigh the potential of a new technology with the many risks – there are several barriers to widespread blockchain – not limited to security concerns, but also the slow implementation process for entire industries to build a new foundation conducive to blockchain.

The main driver behind increased adoption of any new technology is consumer demand. As we’ve seen with currencies like Bitcoin, if the demand isn’t there, the technology or product will falter. Companies hoping to maximize on new innovations should ensure the lasting power behind the technology they hope to adopt, as well as fully realize the cost/benefit tradeoff for their company’s bottom line to stay one step ahead of competitors.

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