What’s Trending in Mobile Payments

Digital payments improve the profitability of small- and medium-size businesses (SMBs). That’s the conclusion of a recent study produced by Visa® and “a consortium of key industry organizations” titled Digital Transformation of SMBs: The Future of Commerce.1   

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What’s Trending in Mobile Payments

Nov 26, 2018

What’s Trending in Mobile Payments

Digital payments improve the profitability of small- and medium-size businesses (SMBs). That’s the conclusion of a recent study produced by Visa® and “a consortium of key industry organizations” titled Digital Transformation of SMBs: The Future of Commerce.1 

The two core reasons for the finding? Based on survey responses, “Visa estimates that the SMBs’ average cost of processing digital payments … is 57 percent less than that of non-digital payments. Further, 65 percent of SMBs agree that customers spend more when they use cards versus cash.”

If you’re a small business owner that should be music to your ears, as is the finding that “78 percent of consumers surveyed rank[ed] a digital payment method, such as paying with a card or mobile device, as their number one preferred payment option.”

But because digital and mobile technology is redefining consumer expectations—including expectations for purchasing experiences—it behooves you to keep abreast of what’s new and what’s trending in the world of digital and mobile payments. With that in mind …

The continuing rise of mPOS, in-app purchases, P2P payments

One of the defining trends of the next five years will be the widespread adoption of mPOS technology and mPOS devices. According to a new study by Juniper Research titled POS & mPOS Terminals – Our Vision for 2023, annual mPOS transactions will exceed 87 billion by 2023, up from an estimated 28 billion this year. Moreover, the average price of an mPOS device is expected to drop over that time frame, making mPOS an attractive option for virtually every business, including previously cash-driven businesses.

At the same time, we expect to see increased adoption of retail mobile apps. Per Synchrony’s 2018 Digital Study, “consumers are using double the number of retail mobile apps versus a year ago, and their purchase activity through these apps has increased … with 83 percent of consumers saying they are happy with the experience of their retail app(s).” This perhaps explains why “sixty percent of U.S. consumers believe that by the year 2025, the average shopper will carry their phone and no physical wallet.”2 

We’re also likely to see the continued decline of friends and relatives reimbursing each other using cash and checks. A study by the social spending platform Rublix shows that the peer-to-peer payment app Venmo is now outstripping ATMs in terms of the volume of transactions.3 And Zelle (est. 2017)—which enables users to transfer money from their bank account to another registered user’s bank account using a mobile device—is already huge, having processed 100 million transactions worth $28 billion on its platform during the second quarter of 2018.4

Contactless payments

Another technology that promises to be huge within the new few years is contactless payments. Research like that conducted by the U.S. Payments Forum indicates that consumers are inclined to tap or wave, assuming they have the opportunity.5

And because they increasingly do have the opportunity, contactless payments are gaining in popularity sooner than predicted. In fact, according to Juniper Research, “contactless payments will exceed the $1 trillion mark for the first time in 2018, a year earlier than expected.” Furthermore, “by 2020, in-store contactless payments will reach $2 trillion, or 15 percent of all in-store transactions,” with payment wallets from Apple®, Samsung® and Google™ leading the way.6

Can anything slow the roll of fintech?

Meanwhile, an accelerated pace of growth seems almost inevitable across fintech, though consumers could be resistant to select developments owing to concerns about security.

A new study conducted by The Clearing House reveals that two-thirds of consumers surveyed are “very or extremely concerned about data security and privacy when using fintech apps,” and “half are uncomfortable sharing payment and financial information with the apps.” Moreover, consumers don’t like the idea of their data being used for purposes beyond the functionality of the apps, with nearly half of all users saying that makes them less likely to use those services.7

At this point, the buying public don’t seem particularly comfortable with biometric payments either. A report titled Vital Insights into Biometrics Payment Adoption reveals that 61 percent of consumers surveyed felt that providing companies their fingerprint and iris information put their personally identifiable information at risk. On the other hand, younger generations may be more comfortable with the technology as one-quarter of adults aged 18-24 have made a biometric payment.8

However, the security of mobile payments is likely to improve rapidly, as software allows the world to move beyond the PIN and password to a place where multiple physiological and behavioral measurements are used in combination to identify and authenticate users.

Also, the ability to use mobile devices to make retail and store payments ought to facilitate the financial inclusion of the “unbanked,” allowing consumers without traditional bank accounts to purchase from vendors that were once out of reach.

Challenges of predicting the future

Of course, it’s worth noting that it’s difficult to predict the future and disruptive new technologies could change the arc of development in the payments space.

At a minimum, modern mobile payment options seem likely to prove disruptive in select industries. The travel industry has been mentioned as one possibility, as the availability of payment options could influence how and where consumers book and pay for travel reservations.9

Or, it’s possible that a little-noticed development today—like Apple’s decision to open up its NFC interface to third-party applications—could prove to be incredibly disruptive tomorrow. As of September 12, 2018, “any external device can now open an app automatically or trigger an Apple Pay® payment by simply sending an NFC signal.” In other words, “instead of using a POS terminal for in-store card-present NFC payments, [an] Internet of Things (IoT) device [can] trigger a mobile card-not-present payment—just like when using Apple Pay online.”

Blockchain and Blockless Blockchain

Finally, it’s beyond the scope of this article, but both blockchain technology and cryptocurrency could conceivably have a big impact on the payments environment going forward, even though both seem a far cry from being ready for primetime.

There’s even a technology called blockless blockchain, with Currency of the Internet (COTI) working on a system that promises to be capable of “tens of thousands of transactions per second … much closer to the kind of throughput needed to go mainstream,” a reference to a common flaw with blockchain solutions—that is, inability to scale.

Last but not least, there’s also the distinct possibility that we haven’t yet heard about the ‘next big thing.’

“Remember, just a couple years ago, most people had never even heard of bitcoin,” reminds Payment Week, “let alone considered the possibility that they might use it instead of the dollars.”

1 Digital Transformation of SMBs: The Future of Commerce, https://usa.visa.com/about-visa/newsroom/press-releases.releaseId.15736.html

2 The 2018 Synchrony Digital Study uncovers the evolving landscape of digital shopping and payments, https://newsroom.synchrony.com/document-library/retail-consumers-adopt-new-technology
 
3 Study: Venmo outpaces ATM cash withdrawals with millennials, Mobile Payments Today, https://www.mobilepaymentstoday.com/news/study-venmo-outpaces-atm-cash-withdrawals-with-millennials/

4 Zelle processes 100 million transactions in Q2, Mobile Payments Today, https://www.mobilepaymentstoday.com/news/zelle-processes-100m-transactions-in-q2/

5 Contactless Resources: Implementation Considerations and Clarifications, U.S. Payments Forum, http://www.uspaymentsforum.org/u-s-payments-forum-contactless-resources-implementation-considerations-and-clarifications/

6 Study: Apple Pay to lead contactless payments surge among mobile wallets, Mobile Payments Today, https://www.mobilepaymentstoday.com/news/study-apple-pay-to-lead-contactless-payments-surge-among-mobile-wallets/

7 Consumers fret over fintech apps’ security, Mobile Payments Today, https://www.mobilepaymentstoday.com/news/consumers-fret-over-fintech-apps-security/

8 Vital Insights into Biometric Payments Adoption, Transaction Network Services, August 2018.

9 Study: Payment choice might influence how consumers book flights, Mobile Payments Today, https://www.mobilepaymentstoday.com/news/study-payment-choice-might-influence-how-consumers-book-flights/

Apple and Apple Pay are registered trademarks of Apple Inc.  Samsung is a registered trademark of Samsung Electronics Co., Ltd.  Google is a trademark of Google Inc. All trademarks contained herein are the sole and exclusive property of their respective owners.  Any such use of those marks without the express written permission of their owner is prohibited.  

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