How Mobile Payments Will Change the Way the World Pays

Mobile payments will be our tomorrow. The segment is experiencing explosive growth and in-store payments are predicted to grow at a five-year compound annual growth rate of 154% to $189 billion in 2018 from $1.8 billion in 2013 in the US. In-store mobile payments will account for close to 4% of store transaction value by 2018. Another important fact to note is that these payments will be driven by millennials who have been the easy adopters of mobile wallets. According to statistics available, around 55% of people who avail mobile payments in the US are from the millennial age group of 18 to 34. And they will continue to drive and set newer trends in mobile wallet adoption and the industry as well. In the UK, during Christmas last year, 3 billion pounds came from mobile shopping and it accounted for 27% of online sales. It is being estimated that the total mobile payment transaction value in the UK will hit $1.35 billion in 2014 and consequently rise to $4.34 billion by 2018.

The industry has been talked about from 2009, but it’s in 2015 that mobile payments took flight in the earnest. And it probably started with Apple’s iPhone 5 and its Touch ID technology. Though Google Wallet existed three years before Apple Pay hit the consumer’s smartphone, it didn’t offer the ease of transaction that Apple gave its users. Starting from when it allowed Apple users to unlock devices and verify App Store downloads in a secure and effortless way through its iPhone 5 models, the company extended the Apple Pay service for its newer iPhone 6 series and iPads where one could pay for digital and physical retail transactions through the preinstalled iOS payment app called Passbook.

Newer smart apps that bypass payment terminals by allowing users to make in-store purchases entirely with their phones will change the way payments are made in restaurants, bars and stores, making it a software-only process. Going forward, there will be more players joining the mobile marketplace that already has established names like Google Wallet, Apple Pay, PayPal, SoftCard, WeChat, etc., that will further fragment it. Experts say that the key differentiator will be the payment-enabling technology that retailers choose to consider. Whether it be QR code or NFC, it will play a big role on how the mobile payments segment takes shape in coming years. While both NFC and QR are fast and require no actual contact between the smartphone and the item containing the QR code or NFC chip, NFC is said to be more versatile while QR remains the same once generated. Even though QR currently has a wider market since more phones can read them, NFC is poised to become more popular in future because of its ease of use. With NFC technology, a user can wave the phone near the NFC tag area with the information being passed instantly and no dependence on app or analysis. On the other hand, for QR codes, a user has to open a scanner app on their smartphone, hover over the QR code and wait for the phone to analyse and react to the code.

For now it’s a wait-and-watch game as customers slowly warm up to the mobile payments option. Until then, retailers have to set their mobile strategy on the correct path, so as to take advantage of exciting times ahead for the mobile payments space.