While the mobile payment infrastructure is now in place (NFC-enabled phones and POS terminals, various platforms such as Apple Pay), we are about to enter the second phase of growth for the theme, which is mass adoption of payment solutions by consumer.
Increasing marketing and improving ergonomics, security and value-added services (such as rewards, loyalty and couponing) should give a major boost to consumer engagement.
Mass adoption is not a question of if, but when:
Government incentives for a cashless society are another major catalyst: increasing number of limits on cash transactions all around the world.
The best way to capture this secular growth in the volume of digital payments is to get exposure to payment processors, which handle all these transactions.
Mobile payments refer to all payment transactions made from or via a mobile device and debited either on a bank account or on a mobile operator bill.
All smartphones now allow contactless payments in a simple and quick way via an electronic mobile wallet, and can also become POS terminals for merchants.
THE FUTURE OF MOBILE PAYMENTS
In-car payment solutions will allow drivers to pay for gas, toll fees or public parking without having to pull their credit card or smartphone from their pocket.
Payments in virtual stores are another exciting opportunity:
The seamless checkout experience (pioneered by Amazon Go) will deal a final blow to cash payments. In an Amazon Go store, you just walk in, pick the groceries you need and walk out without having to go through a checkout line. Your Amazon account is automatically debited when you exit the store. This revolutionary checkout experience is likely to be adopted by other major retailers in the future.
With tokenization technologies and the emergence of biometrics, mobile payments become more secure than contactless card payments.
To fight money laundering and tax evasion in 2014, Israel limits cash transaction between businesses to 5,000 shekels (USD 1,400) and private transactions done in cash or by check to 15,000 shekels.
In most EU countries cash payments are limited:
India demonetized some of its banknotes at the end of 2016.
The European Union plans to launch a service by the end of 2018 that allows mobile payments person-to-person using the mobile phone number as a proxy for the IBAN.
The annual transaction volume via mobile payments in 2015 was $450bn and is expected to exceed $1tn in 2019.
Asia Pacific and Africa are early and faster adopters of mobile payments with more than 100 million mobile payments users.
Mobile Payments are a solution for providing financial services to unbanked people:
In Sub Saharan Africa, the mobile penetration in Africa is 70% but only 10% of the population have a bank account.
Payments via mobile are the faster and cheaper way to send money to family. The SMS and USSD technology is compatible with 99% of mobiles.
In China, under the impulse of e-commerce and due to the low use of bank cards online payment, and especially mobile-commerce, has become a reality.
Annual transaction volume in $Bn
Source: AtonRâ Partners, TrendForce, NFC
Mobile payment users by region
Source: AtonRâ Partners, Gartner Inc.
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The merchant pays to the acquirer a "merchant discount“ of ~ 2.50%. How are these costs shared?