The credit card processing landscape has gone through dramatic changes in the last decade and nowhere is this more apparent than in the world of mobile payments. While still viewed as more of a curiosity in some regions and only popular with younger people, reports show that the mobile payment marketplace is growing faster than ever.
Between 2016 and 2017, the mobile payment market grew from $601 to $720 billion. By the end of 2019, it’s predicted to hit $1 trillion, nearly doubling within just two years. By 2023, estimates place the market at $2.7 to $4.5 trillion.
Here’s where mobile payments are today and the biggest trends in the mobile payment landscape.
Understanding Mobile Payments
“Mobile payment” is a broad term that refers to payments made through a smartphone or tablet. Mobile payments can include payments initiate from browsers and apps then sent online, payments sent via text, and payments that use contactless NFC technology to send a payment wirelessly to a physical device or cash register.
Mobile payments use two types of technology: mobile wallets and mobile money. Mobile wallets store debit and credit card information on a smartphone to use in NFC or app payments as well as loyalty programs, coupons, and other information. Mobile money refers to storing a cash balance on a phone.
A mobile payment can involve any of the following:
- Mobile peer-to-peer payments. This includes services like Square Cash and Paypal that allow users to send money to friends and family via an app which transfers a balance from one account to another.
- Mobile e-commerce which involves making purchases online. This can include online bill pay, shopping through an app, or online shopping using a mobile browser.
- In-store mobile payments. This is also called contactless payments and it uses a phone and mobile wallet to make a payment instead of using cash or swiping a card. This type of purchase uses NFC technology in which the phone communicates with the merchant’s payment processing equipment.
- Mobile card swiping. This refers to merchants who use a phone or tablet to accept credit card payments instead of a traditional POS terminal. This is also referred to as mobile credit card processing.
The Growth in Mobile Payments
Mobile payments are growing in popularity for many reasons, especially convenience and security. Consumers don’t need to carry a card that could be stolen or lost to make payments, even in-store. Mobile payments, especially NFC-based payments, also offer greater security and peace of mind. Swiping a card isn’t a very secure type of payment processing because card information is stored and transmitted over a network with many opportunities for theft.
Despite rapid growth over the past two years, most U.S. retailers don’t yet offer contactless NFC payments and most consumers don’t rely on the technology. Still, the evidence suggests mobile payments aren’t just a fad but a look at the future.
A growing number of consumer credit cards in the U.S. are now equipped with contactless chips to enable contactless payments like the Costco Anywhere Visa and American Express cards.
Outside of the U.S., mobile payments are becoming the standard. In Australia, 53% of consumers use a contactless payment at least weekly to pay for groceries and other basic goods with most stores offering contactless terminals. In China, low adoption of credit and debit cards along with availability of mobile payment services has caused skyrocketing growth in mobile payments. China alone accounts for over 50% of global mobile payments.
In the U.S., there are two factors holding back further growth of mobile payments: credit and debit card use is very entrenched and merchants have been slow to invest in new payment processing
FAQ About Growth in Mobile Payments
What are the benefits of using mobile payments?
Mobile payments offer several benefits over traditional payment methods, such as cash and credit cards. They are more convenient, as you can make payments with your phone without having to carry cash or a credit card. They can also be more secure, as your payment information is not stored on your phone. Additionally, mobile payments can offer rewards and discounts, such as cashback or loyalty points.
Why is the mobile payments market growing so rapidly?
Several factors are driving the growth of the mobile payments market. One factor is the increasing popularity of smartphones. As more and more people own smartphones, they are becoming more comfortable using them for payments. Another factor is the growing acceptance of mobile payments by merchants. More and more merchants are now accepting mobile payments, making it easier for consumers to use them.
What are the challenges facing the mobile payments market?
There are many challenges facing the mobile payments market. One challenge is security. There are concerns that mobile payments may not be as secure as traditional payment methods. Another challenge is the lack of standardization. There are some different mobile payment systems, and this can make it difficult for consumers to know which system to use.
What is the future of mobile payments?
The future of mobile payments looks bright. The market is expected to continue to grow rapidly in the coming years. As more and more people adopt smartphones and merchants accept mobile payments, mobile payments will become the preferred payment method for many consumers.
