Currently, consumers using their mobile devices to buy products online dominates the mobile payment market, with m-commerce accounting for 90% of revenues. But this is set to change, with the likes of contactless and P2P payments experiencing strong growth. Forrester’s ‘contactless’ category covers a range of technologies that let users pay for goods with their smartphones (Reports StrategyEye). These include payment details stored in an app such as Google Wallet, plug-in card readers such as Square’s and NFC-based options such as contactless credit cards, which owners can tap to a point-of-sale device to pay. In fact, while contactless now represents the smallest category within mobile payments, it will see the fastest growth through 2017 due to a combination of increased convenience and early entrants looking to scale their product. In 2017, contactless payments will account for nearly half, or USD41bn, of the market, but P2P, while seeing increased adoption, will fail to achieve anything like the same scale, according to Forrester.
With contactless payments set to see the biggest growth, it is companies like Square and PayPal that are driving the expansion of the mobile payments market. Both are making a big push to roll their payment solutions out to local retailers and national chains, as they attempt to boost their profiles and drive up adoption. Last year Square partnered with international coffee shop chain Starbucks in a deal that will see the firm powering payments in shops nationwide and may become a springboard for CEO Jack Dorsey’s company to launch beyond the US. Meanwhile, PayPal has partnered with a group of high-profile national brands such as Wal-Mart and Toys ‘R’ Us, as well as ATM firm NCR to bring its mobile payments solution to shops, petrol stations and other retailers.
Mobile payments has grown into a highly-competitive market, with young mobile-focused payment startups jostling for space alongside veteran online-focused companies such as PayPal that are now turning their attention to mobile products. Forrester analyst Denee Carrington predicts that 2013 will be a pivotal year for the industry, as increased adoption raises consumer expectations of payment service, with only the strongest services able to stay in the running in the battle for consumer loyalty.
“Mobile payment and digital wallet providers face significant hurdles to achieving adoption at scale, and 2013 will be a pivotal year in that quest,” says Carrington. “This year will mark the beginning of the end for some mobile payment solutions as competition heightens and expectations for economic outcomes rise. But those solutions that deliver value, convenience, and a clearly better alternative for both merchants and consumers will thrive as mobile payment adoption accelerates.”
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