Mobile payments took a major leap forward in 2015 with the launch of Samsung Pay, LG Pay, Chase Pay, Walmart Pay and other major players hedging their bets that mobile wallets may soon gain mainstream status. With the debut of Apple Pay one year prior, the combined momentum could make 2016 a pivotal year for the mobile wallet movement.
Worldpay predicted that with many of the growing pains behind us, 2016 will herald "the third age of digital payments" and that digital wallets will come of age within the next five years. The global payment company cited as contributing factors the growing popularity of electronic wallets; near field communication offerings from Apple, Samsung and Google; and bank and branded mobile payment apps competing for consumer loyalty.
"The first age of digital payments kicked off with the e-commerce boom in the early 2000s when companies like PayPal and Alipay introduced e-wallets to the mainstream," said Kevin Dallas, Chief Product and Marketing Officer, Global eCommerce at Worldpay. "The second phase coincided with the rise of the smartphone at the beginning of the decade, and we've since seen a proliferation of new mobile apps that quickly raised the bar for convenience in payments."
Worldpay's most recent Global Payments Report, projected that e-wallets will overtake credit cards in the global e-commerce market by 2019, and account for 27 percent of global turnover compared with 24 percent for credit cards. Over the same period, alternative payment methods are expected to account for a significant portion of the remaining market alongside traditional debit card, bank transfer and cash payments.
"However, with so many options being rolled out so quickly, a sense of app fatigue has begun to set in leaving both consumers and merchants unsure of which approach is best and questioning the convenience of using multiple e-wallets," Dallas said. "I expect the next few years will see a consolidation of the market as the public [homes] in on their preferred payment methods and conscientious merchants feel more confident buying into technologies that their customers have already embraced."
Technologies like tokenization and host card emulation that support mobile payments are also expected to make further inroads in the coming year.
"In 2016, we're going to see more and more services come to market from issuers and enhanced services from the OEMs," said Martin Cox, Global Head of Sales at Bell ID. "As more services come to market, the components that make up the mobile payments infrastructure – cloud payments and tokenization services, for example – will start to fragment as players begin to find their natural place, breaking the payment schemes' monopoly."
Cox believes market competition will intensify as new players enter the mobile ecosystem and existing relationships between technology providers and banks build upon value-added services to secure market position. He expects more banks to deploy programs in-house that were previously outsourced to bring greater control, efficiency and autonomy channel wide.
Todd Freyman, Vice President of the Americas at Bell ID agreed that mobile payments, tokenization and card-not-present payments will gain presence in North America this year. "The OEMs and banks are talking about value-added services and, with the importance of couponing and loyalty in the States, this is going to drive significant consumer adoption by enabling new efficiencies and convenience at checkout."
Still, to reach a tipping point and displace plastic cards, mobile wallets must deliver more than just another payment mechanism to win over consumers. Bell ID Chief Executive Officer David Orme said service providers need to recognize that payment is "not enough of a benefit to drive consumers to use their smartphones to 'tap and pay.' This is where value-added services come in: loyalty, ticketing and gifting can all be catalysts."
Ease of use at all access points will also factor more prominently in mobile this year. Tim Sloane, Vice President of Payments Innovation at Mercator Advisory Group, who authored a report on the technologies that will most impact payments in 2016, said, "The elimination of passwords is no longer the distant future, and mobile devices coupled with payment APIs are creating a set of new payment services that enable consumers to use existing merchant accounts at new locations."
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