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Global Growth in Mobile Payment Solutions

By Mike Faden

As smartphones spread worldwide, so do mobile payments. The use of mobile payment solutions is expanding rapidly in all major geographic regions, and is a key factor driving the growth in non-cash transactions, according to the Capgemini/BNP Paribas World Payments Report 2017. The fastest growth is in developing economies in Asia, Africa, and Latin America; in some countries, people are transitioning directly from cash to mobile payments.1 China is currently the world's largest user of mobile payments by far, according to analysts.2,3

Several market-research firms estimate that transactions are growing at 20 to 40 percent annually. However, estimates of current global mobile payment volumes and value vary widely, ranging from hundreds of billions to trillions of U.S. dollars.4,5,6,7

 

What are Mobile Payments?

 

Mobile payments are generally defined as payments made with a smartphone or tablet. The majority of mobile payments are "remote" payments, according to Juniper Research8: payments that are initiated from web browsers or apps and transmitted over the Internet, or are sent via text messages. Mobile payments also include "proximity" or "contactless" transactions in retail outlets and other physical locations, in which a user's smartphone sends a payment wirelessly to a nearby cash register or other device, usually using the Near Field Communications (NFC) protocol.9

 

Two key overlapping technologies in mobile payments are mobile wallets and mobile money. Mobile wallets store credit and debit card information on the user's phone for use in remote or proximity payments; wallets may also store cash, coupons or other information. Mobile money usually refers to storing a cash balance on a phone, and is a particularly important trend in developing economies where many people do not have bank accounts or credit cards. Users convert physical cash to mobile money and are then able to participate in a wider range of remote and local transactions.10

 

Trends in Mobile Payment Solutions

 

A variety of global and regional factors are driving the growth in mobile payments. They include the global spread of smartphones, especially in developing economies. Major smartphone technology suppliers are making their mobile wallets available in more countries, and working with a greater number of local financial institutions.11 Developers are building mobile payment capabilities into chat, messaging and other apps.12 The growing adoption of ride-sharing and other services also helps to drive mobile payments, because those services are accessed via apps that include built-in payment capabilities.13

 

Growth in China and India

 

China and India have overtaken the U.S. as the world's largest smartphone markets, according to market-research firm Canalys.14 China and India have also experienced extraordinary growth in mobile payments. In China, contributing factors include the rapid growth of e-commerce, the relatively low adoption of other payment methods such as credit cards, and the availability of mobile payment services from China's big Internet companies, which together accounted for more than 90 percent of the country's mobile payments in 2016.

 

Mobile payments at the point of sale have taken off due in part to the use of QR codes to identify sellers and products, which eliminates the need for expensive NFC terminals. In 2016, China accounted for more than half of global mobile payments value, according to Juniper Research. Today, the use of mobile payments is concentrated into large cities, but growth may spread to rural areas in the future, according to the World Payments Report.15

 

In India, a temporary "demonetization" initiative in late 2016, which meant large-denomination banknotes ceased to be legal tender, triggered a dramatic increase in mobile payments, which some observers believe may have a long-term effect in moving the country's economy toward a less cash-intensive future. The volume of electronic payments leapt 380 percent between April and October 2017.16 Government initiatives such as a national biometric identity scheme and standard interfaces to national payments platforms have also encouraged the growth of mobile payments.

 

The Spread of Mobile Money

 

Use of mobile money continues to expand rapidly.17 Globally, there are more than 170 million mobile money accounts in active use, and more than half a billion accounts have been registered overall, according to GSMA, the mobile network operator industry group.18 A GSMA report counted 277 mobile money services in 92 countries, more than half of them in sub-Saharan Africa, where the number of mobile money accounts surpassed the number of bank accounts in 2015; in 2016, more than 40 percent of the adult population in Kenya, Tanzania, Ghana and Paraguay actively used mobile money accounts.19

 

Mobile money is also being used for a growing range of business and consumer transactions, including bulk disbursements such as salary payments, international remittances, and bill payments. In some cases, mobile money services also act as a gateway to other financial services, enabling users to generate a credit history, borrow money and access other financial services such as insurance.20

 

North America

 

In the U.S., mobile payments are driving overall digital payments growth, according to an Accenture 2016 digital payments survey.21 However, experts say adoption has been much slower than in other countries such as China or India.22 One reason is that credit and debit cards are much more entrenched; users see no compelling advantage in using smartphones to do the same job. "Cash and plastic cards meet their needs," according to the Accenture report. "The reality too is that merchants have been slow to invest in modern card readers [that support mobile payments]. Even if people want to pay by smartphone, they often cannot."

 

Still, awareness of mobile wallets is increasing; Accenture found that 56 percent of respondents were aware that they could use smartphones for payment, a 15 percent increase since 2012. More retailers are implementing point-of-sale terminals that support contactless payments, and more commerce is shifting from physical to online stores.23 A growing number of retailers are also providing apps that support mobile ordering, and smartphones are also being used for transit payments.24

 

Europe

 

European countries share some characteristics with the U.S., such as high use of credit cards and slower adoption of mobile payments than some other countries. Still, a report by Forrester Research predicts that mobile payments in EU countries will almost triple between 2016 and 2021, driven by factors such as the proliferation of mobile devices, launches of mobile payment solutions, and in-app payments.25

 

In the U.K., contactless payment technology is spreading rapidly; there were 2.9 billion contactless payments in 2016, nearly 2.7 times as many as the previous year.26 However, most of those payments were executed with contactless credit and debit cards; in fact, one survey suggested that the popularity of contactless cards may be slowing adoption of mobile payment services. The survey suggested that many people fail to see the benefit of paying by phone, and may also have security concerns.27

 

The

Takeaway:

Adoption of mobile payment solutions is increasing by double-digit percentages annually across all major geographic regions, and in many countries is the key driver of growth in non-cash transactions. Adoption is fastest in emerging economies that are transitioning directly from cash to mobile payments, and slower in some countries where the use of credit and debit cards is widespread. Mobile payments are expected to continue growing due to several factors, including the spread of smartphones and mobile payment solutions, adoption of contactless payment technologies, and increased use of in-app payments.

Mike Faden - The Author

The Author

Mike Faden

Mike Faden has covered business and technology issues for more than 30 years as a writer, consultant and analyst for media brands, market-research firms, startups and established corporations. Mike also is a principal at Content Marketing Partners

Sources

1. World Payments Report 2017, Capgemini and BNP Paribas; https://www.worldpaymentsreport.com
2. “Mobile Payments: Highlights worldwide,” Statista; https://www.statista.com/outlook/331/100/mobile-payments/worldwide
3. Mobile Payments Market to Reach $3,388 Billion, Globally, by 2022 - Allied Market Research,” Allied Market Research; https://www.prnewswire.com/news-releases/mobile-payments-market-to-reach-3388-billion-globally-by-2022---allied-market-research-610395985.html
4. “Mobile Payments: Highlights worldwide,” Statista; https://www.statista.com/outlook/331/100/mobile-payments/worldwide
5. “Mobile Payments Market to Reach $3,388 Billion, Globally, by 2022 - Allied Market Research,” Allied Market Research; https://www.prnewswire.com/news-releases/mobile-payments-market-to-reach-3388-billion-globally-by-2022---allied-market-research-610395985.html
6. War of the Wallets, Juniper Research; https://www.juniperresearch.com/document-library/white-papers/war-of-the-wallets
7. “Global Mobile Wallet Market will reach USD 3,142.17 billion by 2022: Zion Market Research,” Zion Market Research; https://globenewswire.com/news-release/2017/01/19/909307/0/en/Global-Mobile-Wallet-Market-will-reach-USD-3-142-17-billion-by-2022-Zion-Market-Research.html
8. War of the Wallets, Juniper Research; https://www.juniperresearch.com/document-library/white-papers/war-of-the-wallets
9. Mobile Payments Market by Mode of Transaction (SMS, NFC, and WAP), Types of Mobile Payment (Mobile Wallets/bank cards, and Mobile Money), and Application (Entertainment, Energy & Utilities, Healthcare, Retail, Hospitality & Transportation, and Others) - Global Opportunity Analysis and Industry Forecast, 2014-2022, Allied Market Research; https://www.alliedmarketresearch.com/mobile-payments-market
10. State of the Industry Report on Mobile Money, GSMA; https://www.gsma.com/mobilefordevelopment/wp-content/uploads/2017/03/GSMA_State-of-the-Industry-Report-on-Mobile-Money_2016.pdf
11. “Apple Pay officially rolling out in Italy with support from 3 banks,” 9to5Mac; https://9to5mac.com/2017/05/16/apple-pay-officially-goes-live-in-italy-with-support-from-3-banks/
12. “PayPal Launches Facebook Messenger P2P Payment Service,” LowCards.com; https://www.lowcards.com/paypal-launches-facebook-messenger-p2p-payment-service-51588
13. “Paying for your Uber rides,” Uber; https://www.uber.com/en-IN/newsroom/paying-for-your-uber-rides-3
14. “India overtakes US to become second largest smartphone market,” Canalys; https://www.canalys.com/newsroom/india-overtakes-us-become-second-largest-smartphone-market
15. World Payments Report 2017, Capgemini and BNP Paribas; https://www.worldpaymentsreport.com
16. “UPI clocks almost 77 million transactions in October,” The Economic Times; https://economictimes.indiatimes.com/industry/banking/finance/electronic-payments-m-wallets-volumes-seeing-a-decline-hdfc/articleshow/61342447.cms
17. State of the Industry Report on Mobile Money, GSMA; https://www.gsma.com/mobilefordevelopment/wp-content/uploads/2017/03/GSMA_State-of-the-Industry-Report-on-Mobile-Money_2016.pdf
18. Ibid.
19. Ibid.
20. Ibid.
21. “2016 North America Consumer Digital Payments Survey,” Accenture; https://www.accenture.com/us-en/insight-digital-payments-survey-2016
22. “China mobile payments dwarf those in US as fintech booms, research shows,” Financial Times; https://www.ft.com/content/00585722-ef42-11e6-930f-061b01e23655
23. “Total revenue of global mobile payment market from 2015 to 2019 (in billion U.S. dollars),” Statista; https://www.statista.com/statistics/226530/mobile-payment-transaction-volume-forecast/
24. “Mobile payments success can take different forms in the US,” Mobile Payments Today; https://www.mobilepaymentstoday.com/articles/mobile-payments-success-can-take-different-forms-in-the-us/
25. “Mobile Payments in the EU-7 Will Almost Triple in the Next Five Years to Reach $148 Billion by 2021,” Forrester Research; https://www.forrester.com/Mobile+Payments+In+The+EU7+Will+Almost+Triple+In+The+Next+Five+Years+To+Reach+148+Billion+By+2021/-/E-PRE9693
26. 2017 UK Payment Markets Summary, Payments UK; https://www.paymentsuk.org.uk/file/2529/download?token=7ZkWTfjG
27. “Mobile payments struggle to make impact on contactless card use” The Telegraph; http://www.telegraph.co.uk/technology/2017/04/14/mobile-payments-struggle-make-impact-contactless-card-use/

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