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A Growing Appetite for Mobile Payments

As many retailers keeping track of their web analytics know – the world has gone mobile. This means mobile phones are increasingly used to pay for products and services.

It’s anticipated that there will be more than 4.8 billion people using a mobile phone by the end of 2016. For decades, plastic cards have been the only reasonable alternative to cash, but finally the time has come when consumers are demanding digital innovations in all areas of life, including payments. There is a huge appetite for new ways to pay and consumers are eager to use their smartphones.

A world hunger for mobile payments

A recent research by MasterCard found that 38% of Western European consumers are ready to pay using their smartphones, with the Swedish the most eager for mobile payments. In Central and Eastern Europe mobile payment readiness is 57%, while across Russia, Ukraine and Turkey it’s an average 64 percent. At the same time, more than 70% of consumers in Africa and the Middle East are eager to use their smartphones for paying. Most of the surveyed people across all regions have a positive outlook on the future of technology and those living in technologically less developed countries tend to be more enthusiastic about digital innovation than in the markets where it is readily available.

The use of the mobile channels for mobile payments continues to increase, found the Study of Mobile Banking & Payments by First Annapolis. Three quarters of respondents have made a purchase or a payment using their mobile device in the last year, up from 40% in May 2015.

Millennials first served

By 2025, Millennials and Generation Z (those born after the Millennials) are expected to control 47% of gross income. Undoubtedly, these generations are important for any future digital commerce plans since they are consumers who are most likely to adopt new technologies. According to a First Annapolis’ study, 82% of respondents under 35 have made a mobile payment, but the adoption of mobile payments is not limited to Millennials, with 64% of respondents aged between 45 and 54 having also used mobile devices to perform payments. Younger generations are clearly more receptive to emerging technologies, but 2016 Consumer Survey Report by CSI shows that the older consumers are more loyal to their financial institutions and are more profitable customers.

Mobile wallets are taking a bite

The same study found that the banks have a huge opportunity to play a greater role in mobile payments in the future than they do today. More than half of the respondents (51%) have a mobile wallet, while 27% have shown an interest in such a type of payment. Apple and PayPal are the most frequently cited wallet providers, however the banks are the consumers’ most preferred provider, as cited by 45% of respondents (40% of current users and 55% of non-users). According to the same research, the most important functions of such a wallet include: wide acceptance, coupons, ability to pay bills, an integrated mobile banking function and the capacity to store multiple cards.

However, research has also shown that lack of ubiquitous merchant acceptance in addition to security and privacy concerns are still significant barriers to the adoption and use of mobile wallets in the current environment. Mobile payments in general need to be as safe as they are easy to use in order to become a viable option for traditional payment methods. Providing added value in the form of convenience, loyalty or monetary savings, would certainly contribute to wider adoption and even higher usage.

Future predictions

  • By 2017, there will be $60 billion in mobile payment sales. (Source: TechCrunch)
  • 90% of smartphone users will have made a mobile payment by 2020 (Source: TechCrunch)
  • Within the next five years, mobile payments will reach $3 trillion. (Source: First American Payment Systems)
  • By 2019, 1 billion users will use in-store mobile payments. (Source: First American Payment Systems)

Desired mobile wallet features

  • Must have: widespread acceptance, coupon/offer functionality, ability to pay bills, integration with mobile banking, ability to store multiple cards
  • Nice to have: integration of receipts, one-click checkout, access to shopping tools, ability to purchase tickets, order ahead with in-store pickup
  • Not important: P2P, social network integration

(Source: Study of Mobile Banking & Payments by First Annapolis)

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