Mobile Payments Is Hot; But Are Customers Ready?

by Sohini Bagchi    May 19, 2015


Mobile payments in hot and there’s no denying it! Apple pay that debuted the market last year with a bang is said to be a game-changer. Now, Samsung’s new payment system – Samsung Pay – which is devised to take on to Apple Pay, is the newsmaker. Several other players are reportedly eyeing the mobile payment space in the coming years. But the question that comes to mind is: Are the customers ready?

Lacking market readiness

According to the MasterCard Mobile Payments Readiness Index (MPRI) conducted in 2014, no market has progressed to what is defined the ‘inflection point’ score of 60 out of 100 on the mobile readiness scale. There will be some skepticism until the levels of consumer adoption – be it mobile wallets or near field communication (NFC) – surpasses 50 percent.

Other factors that will influence growth are technology infrastructures, mobile commerce clusters, regulations and policies, consumer financial services, and cooperation among industry players.

Read more: Why India Is Not Ready For Apple Pay Yet

“Mobile wallets are not just about mobile payments. Consumers want a better shopping experience. Offering faster or more-secure payments is not enough; wallet providers will have to solve real pain points, such as giving consumers the ability to see what’s on stored value cards at any moment in time, access loyalty points, or automatically receive digital copies of payment receipts,” Thomas Husson, Vice President, Principal Analyst writes in his blog.

For example, in 2007, M-PESA - the mobile money service launched in Kenya, processed around $2.1 billion worth of transactions per month, enabling users to buy groceries to pay utility and school bills, or even purchase airline tickets, all from their mobile, and without needing a bank account. There has been some success with mobile money in Bangladesh, Pakistan and several countries in Latin America.

However, not much has happened until now at a larger, global level. The launch of Google Wallet or Square, both launched in 2011, failed to gain traction among both consumers and merchants. Despite its revamped features, there is skepticism in the industry.

Progress in the mobile payments industry has been slow and fragmented, primarily due to challenges related to infrastructure and adoption.According to a latest study, while about half of mobile users are comfortable using their phones for banking, only 13 percent have used their devices to pay at a restaurant or store, and only one third feel mobile payments are safe.

Jorn Lambert, group executive for emerging payments at MasterCard believes the future of mobile payments is about adopting a consumer-centric mindset – and the three most important things for consumers are convenience, security and ubiquity.

Unless the providers assure these qualities in mobile payments, it will continue to remain a challenge despite its potentials.

Better days ahead

Over the next few years, though, experts are likely to see a shift. While in 2014 consumers made $4 billion of in-store purchases via mobile devices, Forrester Research expects that by 2019 that figure will swell to $34 billion.

Mobile payments have been around for a while now, existing in fragmented markets and geographies. But, the biggest game changer in the world of payments has been the emergence of Apple Pay, which will hit global markets in no time. The Samsung Pay may also follow the same trend.

According to Capgemini’s “World Payments Report 2014″  mobile payments will increase to 47 billion transactions through 2015, up from 29.2 billion in 2013. A Gartner report suggests that mobile commerce currently represents 22 percent of all digital commerce, and will touch 50 percent in the US alone in 2017 .

Forrester predicts by the end of 2015, 27 percent of digital business executives plan to start using mobile wallets to engage with their customers. As consumer usage begins to reach critical mass over the next three years, thanks to the integration of added value services beyond payments, states Husson. 

Read more: Realizing The Potential Of Mobile Payment

Within the next 2-3 years “we’re expecting a few major players to take large parts of the market,” says Mary Monahan, research director of mobile for Javelin Strategy & Research in an interview.

She believes that even though there’s too much fragmentation for mobile payment to practically replace cash, credit, and debit, customers will realize that paying with your phone is no faster or easier than using a card—though eventually mobile-pay providers may use rewards to motivate you.