Cash may still be king for small payments, but its reign looks like being cut short thanks to the unstoppable rise of the mobile wallet.
IDC forecasts that global mobile payments will account for $1 trillion in value in 2017, up a massive 124% from less than $500 billion in 2015. Asia/Pacific markets will make a major contribution to this growth, driven by a large number of initiatives and a diverse mCommerce level maturity.
By 2020, the worldwide market for mobile wallet will hit a staggering $2.7 trillion, driven by merchant and banker acceptance of mobile Point-of-Sale (mPOS) terminals and a proliferation of smartphone, tablet and internet use, according to Mobile Industry Analysts Inc. Government support for cashless transactions to encourage financial transparency and put a stop to tax evasion, is also fueling the technology’s take-up.
Three types of wallet
There are three types of recognized mobile wallets: smartphone or wearable-based payment options, branded mobile wallets from banks and credit card providers and branded mobile wallets. Retailer Starbucks was one of the first to launch the latter.
Mobile payments using Near Field Communication (NFC) technology from the likes of Apple Pay, Samsung Pay and Android Pay will be slower to take off in the short term due to lack of partnerships between retailers and financial organizations, according to Annette Jump, research director at Gartner. "Any mobile payment wallets that are tied to the device will have limited adoption and only if the device has a huge installed base. Instead, cloud-based solutions will have a better chance to succeed as they can reach a wider audience and can support many use cases beyond face-to-face or in-store options. Also, mobile payment and mobile wallet adoption requires a country-by-country rollout plan with an enabled payment infrastructure and agreement with major banks and retailers”, Jump explained.
Asia Pacific leading the way
IDC expects the strongest growth in mPayments will be driven by rising levels of mCommerce as emerging nations come online for the first time via smartphones. In addition, the limited state of credit/debit card adoption in Asia/Pacific will encourage consumers to shift to bank accounts linked to mobile wallets.
"Recent focus on financial inclusion policies in various countries has given a boost to connecting the unbanked. This phenomenon, coupled with the innovation of semi-closed wallet schemes linked to bank accounts, has given a major boost to mobile payments in Asia-Pacific,” explained Shiv Putcha, associate research director and AP connected consumer marketplaces at IDC Asia/Pacific.
Market research company 6Wresearch is projecting the mobile wallet market in India to generate $11.5 billion by 2022. Reserve Bank of India’s (RBI) measures to increase mobile wallet limits, pushing towards its goal of making India a cashless economy, together with competitive marketing campaigns could push the figure even higher. Paytm, Mobikwik, Freecharge, PayU, Oxigen and Citrus are a few leading mobile wallet companies in India vying for market share.
"Mobile wallet is majorly used on the smart devices such as smartphones and tablets, accounting for more than 80% of the mobile wallet transactions followed by desktop PC. Also, Tier 2 cities in India are expected to witness major growth during 2016-22, due to the growing penetration of smartphones and mobile internet subscribers,” explained Rajat Kharbanda, Senior Consultant at 6Wresearch.
Smartphone penetration in India, particularly into more rural areas, has pushed mobile wallet use way ahead of credit cards. Paytm, an RBI-approved secure mobile wallet, for example, now has over 100 million users and accepts over 75 million transactions each month. This is against approximately 22 million credit cards issued in India up until November 2015, according to RBI.
Europe poised for huge mCommerce growth
Mobile wallet transactions in the European Union are expected to grow by 62 per cent between 2016 to 2021, ensuring revenue for the payments industry will pass 1 billion euros, according to a report by market research company Intelling, as more players enter the market. Orange’s mobile wallet app Orange Cash, supported by Wirecard Group, is now available nationwide in France. More than 30,000 retailers recognize Orange Cash, including IKEA, Picard and Relay. Orange Cash customers with NFC-enabled smartphones can also use the service at an additional 2.8 million acceptance points across Europe.
The mobile wallet space in Europe is a fiercely competitive one. As of the beginning of 2015, mobile operators in Western Europe had launched no less than 36 mobile wallet services in 15 countries. Smartphone penetration and the growth of e-commerce has been driving consumer adoption of mobile wallets in the region.
At the same time, the contactless payment infrastructure is fast being built. MasterCard. For example, has set 2020 as the deadline for all European merchants to adopt contactless payments at Point-of-Sale.
The unstoppable wave
Thanks to a surge in users expected, the mobile wallet revolution has only just started. Already companies are exploring new technologies to make going cashless easy. Start-up HyprKey, for example, has already come up with a biometrically secured mobile wallet. With such technological developments in the pipeline cash payments could disappear sooner than we think!
Read more on how mobile financial services fit into Orange’s strategy here.
Jan has been writing about technology for over 22 years for magazines and web sites including ComputerActive, IQ magazine and Signum. She has been a business correspondent on ComputerWorld in Sydney and covered the channel for Ziff-Davis in New York.