July 24, 2016
In recent years, there has been a tremendous growth in mobile payments (although hype exceeded reality). Increased shipment of smartphones, growing adoption and usage of mobile wallets/payments, change in consumer habits and growing retail acceptance of newer methods – all of them are signs of the market in favor of mobile payments.
LTP has come up with an infographic that talks about different modes of mobile payments prevalent in different countries in the world. The main objective of this infographic is to give an idea of which mode of mobile payments is common in different regions of the world and where the opportunities lie. The focus is on proximity payments. In the infographic, we have discussed three major modes of mobile payments – NFC (near field communication - both mobile and cards), QR codes and OTA (over the air). Both NFC and QR codes payment modes can be tagged within proximity payments. Under NFC we have looked at both mobile as well as "cards" used at merchants and transit/transportation. We believe with NFC acceptance infrastructure in place its a matter of time that card based NFC will move to NFC payments on mobile. OTA - mobile wallets and mobile payments that use Internet (apps) or phone networks (SMS/others) including Mpesa.
*Note: The above players in the infographic are examples of companies using the technology
If we carefully look at the data/chart, there are countries (mostly developed) like Japan, Australia, and UK where NFC technology is going to dominate than any other methods. These countries have the NFC acceptance infrastructure with cards or mobile payments already being accepted. In countries like Norway, Sweden and US there is an increase in NFC-based terminals but at the same time wallets (Seamless in Sweden) and other methods of mobile payments are also prevalent. NFC payments using mobile are gaining acceptance in US, UK, Singapore, HK and others due to the trio of mobile payments – Apple Pay, Android Pay and Samsung Pay.
Countries like India, Kenya and Nigeria have OTA as their primary mode of mobile payments. Kenya and Nigeria have Mpesa which has been talked about a lot so we don't need to get into details. As an example, in India if you make a $10 purchase at a medical store that accepts e-wallet payments such as PayTM, the merchant will take your mobile phone number, enter it on the existing payment terminal, after which you will get a one-time password (OTP) on your mobile phone. You share the OTP with the merchant, and she pulls the money from your e-wallet. That is how the transactions are made through OTP mode and are beginning to take place at large and mid-sized merchants already (with lots of offers and freebies from wallet players).
If we analyze the mobile payments in China, QR codes are the most prominent method. With Alipay, Tencent and WeChat using QR codes it has become the most popular payment method among mobile users in China. Apart from accepting mobile payments, brick-and-mortar businesses use it to direct customers to online stores or social media channels. Social network giant Tencent and e-commerce giant Alibaba are the major contributors behind the gained popularity of QR codes in China.
In the US, all the three modes of the payment – NFC, QR code and OTA – are prevalent. Nearly 78% of US consumers are aware of mobile wallet capabilities and 32% of US consumers use a mobile wallet such as Apple Pay or Android Pay. Samsung Pay, Dwolla, Paypal and merchant wallets such as that of Starbucks are some of the other popular mobile wallets in the US market. The vast majority of estimations in the past have been confirming the positive trend of mobile payments adoption in coming years. If in 2015, US mobile payments transactions reached approximately $8.7 billion, by 2019, the number is expected to hit $142 billion. he number of people in the US using smartphones to pay for goods and services at the point-of-sale will continue to increase in 2016. Proximity mobile payments are point-of-sale transactions that use mobile phones as a payment method, via tapping, waving and similar functionality. The US proximity mobile payment transactions are expected to show growth of almost 200% in 2016. It is expected that by 2016, 37.5 million people will be using a proximity mobile payments service, which is a 61.8% increase from 2015.