Using a Loose Definition, Mobile Payments Move to $1Trillion

by Tim Sloane 0

This article in CoinTelegraph, triggered by data from Statistica, throws every mobile payment type imaginable into a large bucket and declares mobile payments are on their way to a $1 Trillion market:

“Although some mobile users are still skeptical about making big money purchases via their smartphone (as they were with their computers a decade ago), many will now buy anything from used goods on eBay to flights across the world. Mobile purchases are now at an all-time high and this trend is predicted to continue over the next few years.
Estimates regarding the number of annual mobile payments vary between experts, but the majority agree that spend will increase by around US$300 billion. According to Statista, mobile spending in 2015 will hit US$431 billion globally, but by 2017 this figure will increase to more than US$720 billion. Naturally, for this happen, technology must continue to improve and users need to feel less “scared” about anteing up via their mobile.
One of the major turning points in the mobile payment industry could come courtesy of an agreement by credit card companies and Apple. With iOS 9 poised for general release, Apple has reportedly come under mounting pressure from credit card companies to drop its fees for the highly anticipated Apple Pay.”

In reality the most optimistic projections for Apple Pay, Android Pay and Samsung pay suggest that these payment types are unlikely to become the predominant mobile payment type any time soon. In fact, card on file mobile payment solutions implemented by merchants such as Starbucks and payment platform suppliers such as Uber and AirB2B are likely to dominate. The article then attempts to explain the challenges Apple Pay and others face, but utilizes incorrect data and substantially misses the mark:

“For this technology to really take off, however, Apple will need to remove the fees it charges for Apple Pay transactions. With news that Google Pay has already made this step, companies such as Visa and MasterCard are pushing for Apple to do the same in order to reduce costs and help the system proliferate.
By the time Google Pay had created its payment system, banks had already made their key card security free, which essentially blocked Google from being able to charge fees. Visa and MasterCard want a similar arrangement with Apple, which would allow the credit card companies to reduce their own fees to companies who use their system, and therefore also to the customer.
Although it’s unlikely some of the major global brands will shy away from Apple Pay just because of a $0.50 charge on transactions, it could deter small and medium businesses and, therefore, could stunt the growth of the product. However, if Apple agrees to scrap its charges, then this mobile payment method could explode in the coming months and soon replace the humble credit and debit cards.
While Apple continues to debate with financial groups behind the scenes, the world outside continues to move forward, and users are still making payments via their phones regardless. Indeed, a quick glance at some of the world’s biggest consumer industries shows that many of the market leaders now have mobile payments as standard.”

The article then describes solutions that range from McDonalds, Starbucks, Angry Birds and others, which again conflates multiple payment mechanisms into Mobile Payments, making insights impossible since the information is muddled.

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Service

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