Mobile payments – still playing hard to get after all these years

Despite smartphone penetration continuing to explode around the world, a universal platform for mobile payments has yet to emerge. It seems that each of the last few years has been predicted as the year that mobile payments will finally take-off, and then – nothing.

By mobile payments, I’m talking about smartphone payments specifically, not SMS payments via feature phones which have actually been hugely popular in some emerging markets for years now. I’m not talking about mobile commerce either (i.e. using the mobile web to shop as you would on the desktop). I’m talking about using your phone as a means of making a physical in-store purchase. The technology has been around for years now and is the norm in some parts of Asia as well as being a huge success with some companies in the US (Starbucks makes 14% of their entire sales via mobile in the US!) but has not yet been more readily adopted across the board.

While it would be naïve to think that this year will be the year that mobile payments finally take-off, this has to happen eventually and there have been a couple of hints over the last few weeks that suggest that a mass market push could finally be on the horizon.

Some more of the big boys are joining the party

Although Google have made a couple of attempts at addressing this space, most of the other tech heavy hitters have remained strangely quiet. But that could all be about to change.

Apple has been biding its time over the last few years, choosing to steer clear of NFC, waiting for the right moment to flick the switch on mobile payments, but there has been talk over the last couple of weeks of finally making a move. Apparently, the company is on the verge of launching a mobile wallet that allows users to make physical in-store payments as early as this Autumn. And you can be damn sure that when they do, there will be serious movement in the space. Apple has 800+ million registered credit cards on file with iTunes. EIGHT HUNDRED MILLION! That’s 800+ million accounts that, with a flick of a switch, can automatically facilitate any mobile payments platform that Apple might roll out.

Similarly, there have also been hints from Facebook that the recently unbundled Messenger app will be integrated with mobile payments somewhere down the line too. And this is what it’s going to take really, the big boys joining the party, the platforms where users already have accounts and spend their time making it easy for them to be nudged onto making payments using their phones. And these guys certainly have the user clout to have a real impact here.

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The future of mobile payments

Whatever form it takes, a growth in mobile payments is inevitable, however slowly it happens. Business Insider has recently compiled some predictions on the future of the space and gives a few reasons why this year might actually be the year we see some significant growth.

By 2018, both mobile payments and mobile commerce combined are to overtake desktop eCommerce in the US with mobile accounting for over $400 billion of transactions. In-store mobile payments alone are to account for $189bn of this figure, growing from $1.8bn in 2013. That’s 10x growth in five years.

There has so far been a bit of a chicken and egg problem around mobile payments with neither retailers or users seemingly pushing for it. Cash and cards are working just fine for both it seems. But consumers are slowly cutting the cord with cash (debit and credit cards were used more than cash for in-store payments for the first time ever in the US last year), and this is predicted to ease the transition from a consumer behaviour point of view into mobile payments.

From the retailer’s perspective, a rise in mobile card readers (and their corresponding apps) is expected to contribute to an uptake in mobile payments acceptance. 40% of small merchants in the US have already adopted mobile card readers and Square currently process $2.5 billion worth of transactions each month. The fact that Chip and PIN cards are finally being rolled out in the US means that retailers will have to update old systems anyway and more and more of them are expected to acknowledge mobile payment acceptance while doing so.

So could we be on the verge of a mobile payments explosion? We’ll just have to wait and see. While big things might be happening over the next 12 months, it still could be another couple of years until true mainstream adoption takes place.

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