What Does the Mobile Payments Industry Need to Reach the Tipping Point?

Increased shipment of smartphones, growing adoption and usage of mobile wallets, change in consumer habits and growing retail acceptance – all of them are signs of the market in favor of mobile payments. While developed countries get there quite steadily, it’s the developing world that is truly on fire with the mobile payments industry. In fact, the future of mobile payments innovation and solutions is expected to be in the APAC region.

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.

Merchant acceptance

Clearly, the dynamic ecosystem of mobile payments is ready to take off and the consumer market won’t be an obstacle, but is the business ecosystem ready? The latest survey results from ACG suggest that about 7% of all smartphone owners claim to have at least tried mobile payments.

However, Marianne Berry, MD at ACG added, "It's important to remember that less than half the smartphones that US consumers carry are capable of mobile payments. Among those with an eligible phone, 27% of consumers we surveyed say that they have used Apple, Android, or Samsung Pay."

Moreover, it appears that 39% surveyed claim they would use mobile payments more if more stores/apps accepted it. On average, users reported using the mobile payment option for 17% of their discretionary spending.

As Berry noted, Overall satisfaction with mobile payments is quite high at 80%, despite complaints about low merchant penetration and inconsistent customer experience at the point-of-sale. But mobile payment has yet to reach the tipping point that will take it from novelty to norm."

Customer habits transformation

Although at this point there is a long way to go for merchants, other estimations suggest that merchant adoption will be driven by mobile payments industry at a rapid pace. The most recent report from BI Intelligence indicated that the number of in-store mobile payment users will grow at a 40% five-year CAGR to reach 150 million by the end of 2020. This represents 56% of the consumer population during that year.

According to the report, mobile payments still face some high barriers, among which are consumers' continued loyalty to traditional payment methods along with earlier mentioned fragmented acceptance among merchants. It’s fair to say that mobile payments have been around much less than credit cards, and given the awkwardness of making the line in the store to wait for a handset and POS terminal to maybe perform/maybe not to perform a transaction sometimes services as an inhibitor for adoption. Given the strength of a habit to slide a card rather than get into mobile phone manipulation at the cashier, it may take some time to make the shift.

Nonetheless, integrated loyalty programs and add-on features are believed to bring US in-store mobile payments volume up to $75 billion in 2016. By 2020, the number is expected to hit $503, billion indicating a CAGR of 80% between 2015 and 2020.

NFC-enabled handsets

Cybersecurity professionals have their say when it comes to mobile payments as well. Gemalto, one of the world’s leaders in digital security, suggests that the NFC ecosystem, a vital key to mobile payments adoption, is constantly growing, with more and more smartphones featuring the NFC capability.

The company refers to Juniper’s Mobile & Online Ticketing Deep Dive Strategy & Competition 2016–2020 report from April 2016, saying that the NFC handset adoption is growing and estimated to increase from just over 740 million worldwide at the end of 2015 to 3.9 billion by 2020. Mobile ticketing is also growing in many areas from traditional transportation to air travel and events and is being further boosted by the growth of wearables.

Overall, it looks like all prerequisites for mobile payments adoption are almost in place and by 2020, they will reach a point where mobile payments adoption can truly skyrocket.