The rapidly-growing mobile payments industry is expected to more than double in just two years from $171.5 billion to $617 billion in transactions by 2016, according to Gartner. Simply, mobile payments is an “umbrella term that refers to a wide variety of approaches such as: a smartphone equipped with a special chip; a credit card number stored in a phone app; or a key-fob size device that turns a phone or tablet into a credit card processor,” says USA Today. Though still in the early adopter phase, startups, carriers, and big businesses are investing heavily in this innovative space.
Consumer behavior and expectations regarding purchases have changed forever, and this is driving the rapid investment and innovation in mobile payment technology. For one, consumers are mobile, and they expect their mobile devices to service them in more ways than ever before. It’s the new normal. Companies that currently accept mobile payments are perceived to be more sophisticated, customer-friendly, and trend-conscious. This is especially true for small businesses, giving them a bit of an edge. On top of that, there is the cool factor.
Businesses experience lower costs, too. With mobile payments, businesses invest less in point-of-sale hardware and long-term contracts with high transaction and commission fees. In fact, the top mobile payment providers -- Square, to name one -- charge only by the transaction at much lower rates than traditional credit card companies. Remarkably, there are no other fees; literally no application fees, shipping fees, equipment fees, or monthly fees. Merchants even see deposits in their accounts within 24 hours. Mobile payments provide one other great advantage too: they increase the speed and agility in which businesses can set up temporary, mobile, or smaller retail sites.
Many forecast that paying with our smartphones will one day be consumers’ preferred method of payment. Forrester sees upward of 25 percent of the population using some form of contactless payment method within the next three to five years, and mobile wallets seem to account for much of this growth. Mobile wallets, or digital wallets, are the personal devices like smartphones that consumers use to pay at checkout. Mobile wallets store credit card numbers via software applications on smartphones and other digital devices.
The future is big and bright. While mobile payments are cutting edge today, the future is about the convergence of a mobile or virtual experience and the physical experience. With mobile convergence, says Forbes, “retailers can emulate many of those components because they know when you’ve entered the store (you open their app), they know your purchase history and brand preferences (you are tied into the loyalty program), they know where you are (using in-store, WiFi-based location services), they know what’s in your cart (using mobile scan-and-bag) and they know how you want to pay (using a mobile wallet, mobile payment, or NFC).
The smartphone becomes the tool by which retailers can directly engage and influence purchase decisions while the customer is in the store and just before they make a purchase decision.” It’s transformational, seamless, and very personal.