In this guest article, Bobbi Leach, the CEO of FuturePay, discusses the future of mobile payments. She considers why the technology failed to set the world alight when the first mobile wallet was released in 2011 and whether 2016 is the year mobile payment adoption actually reaches the “tipping point”.
Ever since Google Wallet was released in 2011, payments experts have projected mobile wallet adoption to go through the roof. Despite these predictions, mobile payments haven’t quite taken off as consumers have been hesitant to adopt mobile technology. To put it into context, in 2015, mobile payments in the U.S. accounted for $8.71 billion, which is a small piece of the overall $450 billion retail market. Some of the top reasons consumers indicate a lack of adoption include security concerns, forgetting mobile payments are an option, not knowing how they work and reluctance to believe mobile payments work.
Due to significant investment and a long list of new innovations in the space in 2015, mobile payments are poised for continued adoption and success in 2016 and beyond. In fact, mobile payment adoption by consumers is almost at 16 percent, which experts see as a “tipping point” when a technology trend truly reaches the mainstream. With this tipping point in mind, mobile payments have the potential to more than triple in 2016 to $27.05 billion, but as similar predictions have fallen short in recent years, only time will tell how widespread adoption will truly be.
What does the future of mobile payments look like? Following are several major players set to make an impact on the industry in 2016.
Top smartphone companies Apple and Samsung are at the forefront of mobile payments technology with their respective mobile wallets, Apple Pay and Samsung Pay. While Apple Pay claims to be the leader in mobile payments, accounting for two in every three dollars spent, adoption is still low and has surprisingly decreased since its launch (15.1 percent to 13.1 percent). Samsung Pay, which was rolled out in 2015, incorporates technology that mimics swiping a plastic card, so users have the option of using Samsung Pay for NFC payments or akin to a traditional card at stores that don’t yet have NFC terminals installed. This gives Samsung an advantage as a low number of retailers currently accept mobile payments, which is an added hurdle in mobile payments adoption.
In addition to these two mobile wallets, the launch of Apple Pay has also led to more widespread adoption of Google Wallet. This new wave of adoption can in some ways be attributed to more merchants adding NFC payment terminals to accept mobile payments, as a result of the buzz surrounding Apple Pay. As of recent reports, up to 87 percent of merchants don’t currently accept mobile payments, but this percentage is gradually decreasing thanks to encouragement from Apple and Samsung.
Following the launch of Apple Pay and Samsung Pay, a top concern from consumers was security, causing them to weigh the pros and cons of convenience versus security. Some experts argue that mobile payments are actually more secure than other options. This is because they leverage advanced security technology such as Apple Pay’s use of secure element tokenization and Samsung Pay’s use of host card emulation (HCE).
Apple Pay and Samsung Pay support payments from various bank accounts, but that hasn’t stopped banks from developing their own mobile wallets. One of the most well-known examples is JPMorgan Chase’s Chase Pay, which was released in October 2015. As payments shift to the digital realm (not necessarily limited to mobile payments), banks want to ensure they’re not losing their share of card revenue and customer loyalty. Therefore, in addition to releasing their own mobile wallets, many are going the route of partnering with other mobile wallet providers to make their card services available to today’s digital consumers.
Partnerships between banks and mobile wallet providers are mutually beneficial. Banks can share their client base and trusted payment security reputation with mobile wallet providers, who in turn contribute their technical capabilities and payment technologies such as NFC and QR codes. Partnering with banks can go a long way when it comes to consumer trust. Banks may actually be better positioned to capitalize on mobile payments than anyone else. According to a recent survey, consumers trust banks far more than anyone else to keep their accounts and data safe.
Retailers and CurrentC
As outlined above, retailers have been slow to convert their payment terminals to make the transition to accepting mobile payments. In addition to the push from smartphone companies, another incentive for retailers to make the switch is the recent Europay-Mastercard-Visa (EMV) mandate. This is a security standard for retailers and banks to include payment terminals in-store that accept more secure, chip-enabled cards (as opposed to magnetic stripe cards). For retailers that don’t make the switch, they are liable for any fraud costs on outdated terminals. The good news for mobile payments is, most of the EMV-enabled terminals also support NFC and other forms of mobile payments, so retailers can adopt both technologies simultaneously.
Some retailers are even foregoing Apple, Samsung and banks’ mobile wallets and developing their own. A few of the key retailers doing so include Starbucks, Taco Bell and Walmart. Starbucks and Taco Bell in particular include a feature for added customer convenience – the ability to place an order ahead of time so it’s ready when the customer arrives at the store. In addition, some of the largest retailers in the U.S. – including 7-Eleven, CVS and Target – have banded together to create CurrentC, a terminal that does not accept Apple Pay. This enables retailers using CurrentC to have access to customer data and shopping habits, which Apple would otherwise keep to itself.
When it comes down to it, all payments, mobile and otherwise, must share a common link of an easy and secure customer experience. A key factor that will drive mobile payments adoption is making the user experience simple and seamless. Consumers expect frictionless mobile payments, so phone companies, banks and retailers all need to take this expectation into consideration when developing and deploying mobile payments technology. Creating a top-notch mobile payments experience doesn’t simply mean incorporating responsive design to fit mobile screens. It also means including fewer form fields, allowing for one-click checkout and other factors to make it quick and easy to check out on a mobile device. Creating a compelling, tailored customer experience can ultimately lead to the “tipping point” mobile payments is waiting for.
About the author
Bobbi Leach is the CEO of FuturePay, a payment option for the omnichannel shopper. FuturePay’s buy now, pay later option benefits businesses and consumers alike by offering shoppers instant credit while shopping online or on mobile devices without the high interest fees associated with using a credit card.
In this guest post, Anthony Walton, CEO of Iliad Solutions, explores how businesses and regulators can increase the safety and efficiency of transactions, and introduce technological advances into the system.
Payment terminals have stayed the same over the last 10 years, with steady advances in contactless and mobile wallet transactions. Retailers and brands are making a conscious effort to get closer to consumers.