Those of us in FinTech love watching the latest trends and innovations in payments technology. We dissect consumer surveys and pore over the latest projections and predictions. We’re always looking out for the next great innovation in the market, and we get nervous when consumers don’t fall in love with something at first sight. I believe that mobile payments will revolutionize commerce, here in the United States and around the globe. But as my industry colleagues often like to remind me, mobile payments aren’t even close to replacing the plastic cards in our wallets.
A recent survey sent waves of unease rippling through the mobile payments industry earlier this month. Research firm First Annapolis reported a slight downward trend in adoption of mobile payments. It’s easy to get wrapped up in the latest numbers, but let’s remember where we stand in the history of mobile payments–mobile payments have been on the market for less than two years. Outside a relatively small bubble of FinTech enthusiasts, hardly anyone would consider that enough time for a consumer technology to take hold.
In reality, there are many reasons to be optimistic about mobile payments.
Disruptive innovation is good. Some say that too many competitors are using too many different technologies, clogging growth of the industry. But this competition is exactly what drives consumer choice and adoption of new services. With mobile payments now available on every major smartphone platform, almost every consumer with a smartphone has the option to use mobile payments. And so merchants understand that their customers want to pay with their phones, and will make the investment in point of sale equipment that accepts mobile payments. Competition drives investment and adoption of new technology.
New technology takes time. Widespread adoption of new technology takes time. For example, we think of shopping online as ubiquitous, but brick and mortar retail still dominates. The commercial use restriction on the Internet–which had blocked online commerce–was lifted more than 20 years ago, in 1995. And last year–exactly two decades after the advent of online shopping–online retail still represented just 10% of overall commerce in the U.S. Don’t confuse pace of adoption with overall market impact or success–new technology adoption is never instantaneous.
Breaking old habits is a process. Like all new technology, consumers must adapt and change their habits – in the case of mobile payments, they must change a 40-year habit of paying with a plastic card. Although plastic card acceptance is ubiquitous, consumers aren’t always sure where mobile payments are accepted. New services like PayFinders allow users to locate merchants that accept mobile payments, helping consumers develop the habit of using their phone to pay where they like to shop.
Mobile wallets are secure. Most mobile wallets on the market today are packed with a suite of security solutions which, layered together, make the smartphone nearly impenetrable to fraud or theft. For example, tokenization of account information, standard practice in mobile payments services, replaces account data with encrypted algorithms that cannot be intercepted and fraudulently used by criminals.
Exponential growth is just around the corner. The arrival of Apple Pay, Android Pay, Samsung Pay and Current-C has propelled mobile payments into the mainstream. According to eMarketer, 2016 will be an inflection point for mobile payments in the US, with transaction value tripling to $ 27.05 billion and proximity payments surpassing mobile e-commerce. Value will more than double in 2017 and grow in excess of 80% through the rest of the forecast period.
If that’s not sufficient reason to be optimistic about mobile payments, just take a look at the huge success Dunkin Donuts has had with mobile payments. You can now buy your favorite donut on your phone and receive rewards while doing it. In its first year, the DD Perks loyalty program has 3 million users. So order a box of munchkins and “keep calm and carry on” with mobile payments.
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