The Future of Payments Is Mobile
Mobile is driving the future of payments—and, along with developments in regulations and new payment populations, there are a lot of opportunities for businesses to provide easier, faster payment solutions.
Recent innovations in the payments industry have extended across the globe. New transaction models continue to emerge, and traditional payment methods—like credit cards, checks and cash—are being joined by a new generation of mobile-friendly methods. From Apple Pay and M-Pesa to PayPal, Venmo and other newly available e-payment platforms (including Facebook and Twitter’s social payment services), payers can choose from a buffet of options, and players from a variety of industries are all able to influence the conversation.
According to Statista, the number of global mobile payments transactions amounted to $52.9 billion in 2010 and is predicted to top $721.4 billion by 2017—and continue to skyrocket. eMarketer projects that mobile purchases made at the point of sale (POS) will grow—in the US alone—from $3.5 billion in 2014 to $118 billion in 2018. At the same time, Celent notes that traditional check purchases are projected to be just $8,655.8 million in the US by 2017, and in emerging markets such as India and China, they’re predicted to clock in at $1,220.6 million and $698.7 million, respectively. In short, mobile payments will likely be an area of major growth for many middle market companies across the globe and may be the key to your future success.
Global demographics play a big part in accelerating the growth of mobile. Many millennials, who now hold midlevel positions in the workforce, have been at the forefront of mobile for over a decade. These tech-savvy professionals—who will only continue to grow as boomers retire—are far more likely to abandon cash payments in favor of mobile transactions than previous generations. And it’s a likely assumption that over the next five to 10 years, mobile may become the norm, rather than the exception—so getting into the market early could have distinct advantages for your company.
Another reason mobile payments are skyrocketing is the increase in consumers—both tech-savvy millennials and emerging-market professionals—with no formal, established banking relationships. Interestingly, the highest adoption rate for mobile is also closely associated with GDP growth. And emerging-market cities represent a giant pool of non-traditional payers who may not have a bank but do have phones—and who are eager to spend their money. In South Africa, for example, before mobile payment options like Wizzit launched in 2005, eight out of 10 customers had no bank account and had never used an ATM. But since mobile payment fees are one-third cheaper there than those offered by traditional banks, a whole new sector of consumers is now ready to do business.
This appetite for mobile payments, as well as increasing global buying preferences, is set to lead to further opportunities for high-margin payments products for companies who get on board with early adopters of mobile payment platforms.
Key Regulatory and Industry Initiatives
As the above-mentioned global drivers impact mobile’s development, key regulatory and industry initiatives are also driving four key market transformation trends:
- Risk Management: Basel III monitors individual bank health and coordinates with the interlinked network of international banks to act quickly and decisively when individual or systemic weaknesses come to light. Further, the capital rules for foreign banks in the US, as well as regulations on virtual currency, bank payment obligations and European mobile and Internet payment security initiatives, and the US Foreign Account Tax Compliance Act (FATCA) all work to reduce risk throughout the global mobile industry.
- Industry Standardization: As both emerging and mature markets embrace mobile payments, a lack of industry agreement on how to best implement the system, and a marketplace riddled with different technology types and business models, have made regulation a challenge. Now though, global initiatives—including cybersecurity and data privacy directives, as well as access to clearing regulations—are helping to drive standardization.
- Competition and Transparency: Along with standardization, competition and transparency continue to be key transformation trends in mobile. Regulations and initiatives in this area include Prepaid Payment Products Regulations in North America, payments governance and pressure on card interchange fees.
- Innovation: As the market share for mobile grows, innovation continues to lie at the industry’s heart. Here, key initiatives and regulations include the UAE’s Mobile Wallet and the EU’s updated Payment Services Directive (PSD II), e-Invoicing, e-Government and Current Account Switch service.
What Does This Mean for You?
Increasingly, customers are choosing mobile payment platforms to not just transfer money between individual accounts but to move money overseas—and more and more expect transactions to happen in real-time. The UK has launched Faster Payments, a service which boasts near-real time credit to beneficiaries for transactions under £100,000—meaning that your money spends more time working for you. Already, this concept is spreading to other countries, including Poland, Singapore, Australia and Mexico.
In short, mobile is the payment model of the future—except that really, the future is already here. And that’s great news for those who are considering—or already utilizing—mobile payment solutions for clients and vendors, because mobile is a high-margin payment process that offers a great return. For multinational companies doing business in these markets, it’s clear that mobile is the key to future growth and additional market share.