The Magic Touch of Mobile Payments

 

 

It is already March, and we’ve all seen the great deal of predictions and key trends revolving around near field communication (NFC) for 2013. I’ve even prognosticated myself. As consumers continue to gain access to mobile payment options and more retailers embrace the technology, the easy-to-use, convenient nature of “tap and go” will certainly be more readily adopted.

Case in point: In 2013 alone, the highly anticipated m-payments market has experienced tremendous activity. According to Prosper Insights & Analytics, as of late January, 77% of smartphone owners conducted banking activities via a mobile device, while 57.9% admit to shopping via their mobile device. While in its report, Mobile Payments Strategies: NFC, Remote Purchases & Money Transfer 2012-2017, Juniper Research predicted that the scale of mobile payments is expected to undergo a substantial leap over the next five years to more than $1.3 trillion. This report, supported by interviews with senior executives from m-Payments ecosystem, including Bango, CorFire, Fundamo, Gemalto and Nokia, indicates that the industry growth will be heavily driven by the sale of physical goods via remote purchases and NFC transactions, accounting for nearly 55% of the total value of m-payments by 2017. As the numbers show, mobile payments are not a lost cause; rather, they will be the driver in the rather large vehicle known as NFC adoption.

The fact of the matter is shoppers carry mobile devices everywhere they go—from grocery stores to shopping malls, from gas stations to restaurants—making it a much more convenient and customizable experience for redeeming coupons, researching products, launching a webpage and paying for things quickly and easily. Just last month, an Internet Retailer Magazine article reported the findings of a recent Forrester Research study. According to the firm, U.S. consumers made $8 billion worth of retail purchases with their smartphones last year, accounting for 3% of total e-commerce sales. Forrester also projected mobile device-based retail sales will continue to grow:

Year Amount Percent of total e-commerce sales
2013 $12 billion 5%
2014 $17 billion 6%
2015 $22 billion 7%
2016 $27 billion 8%
2017 $31 billion 9%

Last April, the Pew Research Center’s Internet and American Life Project as well as Elon University’s Imagining the Internet Center released a study proposing the gradual death of cash and credit card transactions both online and in-stores at the hands of mobile payments. The study suggested that more than one-third of smartphone owners have already used their devices for online banking services like paying bills, checking a balance or making a payment.  Gartner then released a report of its own predicting that worldwide mobile payment transaction values would surpass $171.5 billion in 2012, up nearly 62 percent from the previous year. The report also predicted that the number of mobile payment users would reach 212.2 million in 2012, an increase from 160.5 million a year earlier. Testament to the tremendous potential of the mobile payment landscape, Yankee Group analyst Nick Holland recently released the projection of $1 billion in mobile transactions by the end of 2015.

The predictions were not too far off: M-Commerce sales reached an impressive $24.66 billion in 2012 reported E-Marketer via Internet Retailer. The results mean m-commerce increased an astounding 81% from a year ago. E-Marketer received the numbers from counting the sales made from tablets, smartphones, and other mobile devices. Retail sales from mobile devices accounted for 11% of online sales last year, which is up from 7% in 2011. Emarketer also forecasts m-commerce will increase to 15% in 2013. US m-commerce sales will also rise to 55.7% to $38.4 billion in 2013 as well.

Though many services, such as utilities, finance companies, and online retailers already centrally store your credit card or bank account information, a vast majority of daily transactions — food, drinks and entertainment — are much more impulsive, on-the-whim purchases. The seamless convergence of mobile device and deployment of contactless payment technologies will fundamentally revolutionize the consumer experience. Add to that the growing number of 18 to 24 year-olds acquiring smartphones and being more likely to try new technologies, mobile payments will continue to increase exponentially.

Seinfeld’s George Costanza and his comically overloaded wallet were in the spotlight once again last year during Google Wallet’s debut commercial.

Currently, Google, Isis and MasterCard each provide services that allow merchants to develop their own ‘digital’ wallet. Credit card giants Visa and MasterCard have been advocating the installment of NFC point-of-sale payment terminal readers that not only accept swipes of the “old school” magnetic stripe, but also waves of NFC and contactless chip-embedded credit cards. So why are these credit card companies, mobile operators, financial institutions and other corporations collaborating in the deployment of NFC? It’s not just simply about providing consumers another way to pay, but in terms of easier access, it allows for cloud storage, consolidation and authentication. Currently, Visa and MasterCard process nearly $7 trillion worth of transactions each year worldwide, merely highlighting the widespread potential of m-payments.

Although the total number of U.S. smartphone users continues to grow rapidly, only a minority has purchased anything using their mobile phone. According to the same Forrester Research study above, only about 25% of mobile Internet users made purchases with their phones in the past year.  But those numbers are growing.

As of now, there are nearly 20 billion credit card transactions annually with a projected 15% of all card transactions being mobile by the end of 2013. Companies like Starbucks are cashing in on this growth. Since Starbucks launched its mobile payment service in 2011, it has surpassed 70 million mobile payments. Read more about it in our blog on the quick service restaurant industry. Long story short, this is a clear indication of the current magnitude and potential adoption of mobile payments by the everyday consumer.

The numbers speak volumes. Mobile payments will continue to emerge as an easy, frictionless way to make purchases on-the-go, even becoming an everyday occurrence. This embracement of convenience was exemplified most recently in the Isis trial throughout Salt Lake City and Austin. During the trial, active users are paying with Isis mobile wallet at least five times per week. Though it is not yet the most widespread method of payment, mobile wallets will be among the most compelling consumer applications in 2013, along with social networking and location apps. In the end, having payment on your phone will serve as an incremental step forward in incorporating NFC into your day-to-day life. But as our Bootcamps and future blogs will reveal, NFC is much more than that; it’s about interacting with your physical environment.


About the Author:

Robert P. Sabella is founder and CEO of OTA Training, LLC. OTA is a global leader in RFID and NFC training and certification. OTA Training is the creator and producer of the NFC Bootcamp™ series, the first globally standardized NFC training program. Robert brings more than 20 years of entrepreneurial experience to OTA and is considered one of the most innovative leaders in developing and bringing new technologies to market.

 

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