It’s no longer a question of when and how mobile will emerge as a payments platform.
The habit of paying for things on smartphones and tablets is already ingrained in modern consumer society, particularly among young demographics. In the same way digital payments companies like PayPal helped usher in the PC-based e-commerce explosion, mobile-focused companies are exploring how to make these transactions easier, for shoppers and merchants, at physical stores and online.
In a recent report from BI Intelligence, we put numbers to the trends and explain why mobile transaction volume is growing so explosively. A significant portion of card-powered e-commerce transactions take place on tablet or smartphone devices. Tablets and smartphones are also powering card-based transactions at physical stores through apps, scannable QR codes, and attachable card readers that transform devices into cash registers.
The report answers the main questions surrounding this rapidly growing industry:
- What percentage of credit and debit card transactions are mobile- powered?: Mobile transactions accounted for about 2% of all credit and debit card volume in the United States in 2013, and 4% globally, according to BI Intelligence estimates. The numbers seem low, but for the last five years mobile transactions have experienced 118% annual average growth in the U.S. alone. Africa and Asia-Pacific actually see a much larger share of mobile-driven transactions.
- What exactly is a mobile payment?: There’s a lot of confusion out there about what constitutes a “mobile payment,” and we reiterate our definition. A mobile payment occurs when a mobile, Internet-connected device is used to facilitate a transaction that might otherwise have taken place using a physical credit card, check, or cash, at a store or point-of-sale. Mobile transactions are a larger category that includes these payments, but also includes mobile commerce, or e-commerce channeled by an app or mobile website (e.g., Amazon’s iPhone app).
- Are consumers taking to these solutions?: Smartphone users are becoming aware of mobile wallets, payments apps, and QR-scanning apps and using them to facilitate offline and online purchases — most famously at Starbucks coffee stores. However, overall usage is still low. We look at the dynamics that will drive future adoption.
- And merchants?: Recent survey data shows that two-fifths of U.S. small and medium-sized businesses have adopted card readers.
- Who’s winning in this space?: Payments start-ups are enjoying massive growth and helping to push forward innovation. A wave of acquisitions and mergers will clean this space up.
- How fast is innovation occurring? It’s happening all the time. For example, Amazon’s “Pay With Amazon” product allows the 215 million active Amazon account-holders to use their payment info as they shop on their PCs and mobile devices on different commerce sites and apps.
- Is disruption still possible?: Yes. Take near-field communications, or NFC — uptake has failed to impress. Now, Apple’s Bluetooth-powered iBeacons technology may challenge NFC head-on.
In full, the report:
- Provides estimates on the proportion of U.S. and global credit and debit card-powered transactions that occur on mobile devices, both at point-of-sale and remotely
- Explains why most mobile commerce and mobile payments apps and hardware still depend on credit card numbers to power transactions
- Compares the various consumer-side mobile wallets, both in terms of awareness and adoption
- Analyses the mobile wallet “disconnect,” the tendency of consumers to say they want added services on mobile wallets, despite the relatively low availability of such services
- Examines PayPal’s acquisition of Braintree as an example of the deals that will shape the industry’s future
- Looks at how legacy players like Visa are positioning themselves
- Offers an update on the state of NFC and competing Bluetooth-powered solutions like Apple’s iBeacons
- Quotes industry leaders on their vision of mobile’s role in the transactions space
Disclosure: Jeff Bezos is an investor in Business Insider through his personal investment company Bezos Expeditions.