Why 2019 is a landmark year for mobile payments
Increased mobile penetration and a growing level of consumer comfort with making payments through a smart phone or tablet continues to impact consumer spending habits across the globe.
To measure the impact of this trend, in 2018 Paysafe surveyed consumers from Canada, the US, the UK, Germany and Austria for Lost in Transaction: Payment Trends 2018, our annual consumer research report. The results painted a clear picture of how improved technology, changing consumer habits, and new regulation is reshaping the role of mobile in making card present (CP) and card not present (CNP) payments.
In the report, 9% of consumers stated that they had made a purchase in-person using a mobile wallet in the past month. An equal percentage of consumers had made a payment for a good or service they received in-person via an in-app purchase.
In-app purchasing for online shopping is also gaining traction. Ten percent of consumers from the same regions that were questioned on this topic confirmed that they had made a purchase in-app during the previous month.
And this isn’t a trend that will fizzle out in 2019. Here are three factors that will ensure mobile payments continue to be at the forefront of payment innovation for the foreseeable future.
The role of biometrics in payment authentication
mCommerce, even via a mobile-optimised webpage or in-app, has often been clunky and delivered a poor user experience due to a lack of mobile native payment authentication processes. However, the introduction of biometric authentication through fingerprint technology or facial recognition is a significant upgrade in this area. This will be particularly relevant as VISA and Mastercard roll out their new 3D Secure 2.0 authentication process, of which authentication by “who you are” (biometrics) will be a key component.
And not only will a vastly improved authentication process make CNP payments on mobile more appealing for a user experience perspective, biometric authentication will also likely appeal to consumers with security concerns when it comes to making online payments.
Indeed, 64% of Canadian consumers and an even higher proportion of Americans surveyed (68%) said that they found two-factor authentication systems more appealing when shopping online.
Contactless payments are gaining momentum
Across the Atlantic in the UK, the adoption of contactless technology, which has been part of the payment landscape for over a decade, has skyrocketed. In Lost in Transaction: Payment Trends 2018 54% of UK consumers told us that they had made a contactless payment in the previous month. According to reports, contactless transactions have now surpassed chip-and-pin sales in UK retail stores, hitting 51% of all in-store card transactions in June 2018.
The majority of contactless transactions are made using credit and debit cards, but consumers that have adopted mobile wallet technology are overwhelming positive about its benefits, leading us to believe that we will see greater adoption moving forward. An overwhelming majority (84%) of mobile wallet adopters said that paying using their mobile was more convenient than cash, and over three-quarters (77%) agreed that mobile wallets were more convenient than contactless cards.
We expect to see the number of mobile wallet users rise in 2019, as awareness of their benefits filter into the mainstream. Adopters will also use their mobile wallets more frequently. A large majority (85%) of current mobile wallet adopters told us that they would be using their mobile wallet much more for making payments by 2020. Furthermore, three quarters (74%) stated that they would use their mobile wallet to pay for higher priced items if the value limit for contactless payments was raised.
And whilst adoption of contactless technology in North America is generally much lower than in the UK, awareness of mobile wallets is more equitable. Four out of ten Canadians (42%) and more than a half (54%) of American consumers have used a mobile wallet to make a payment, compared to 56% of UK consumers. And close to two thirds of North American consumers – 58% of Canadians and 61% of Americans – revealed that they preferred to shop at stores that offered contactless payments at the checkout.
But perhaps the biggest driver of in-store mobile wallet adoption in 2019 and beyond will be the manner with which businesses are embracing the new technology.
For our Lost in Transaction: The future of payments for SMBs report, published in October 2018, we asked small and medium businesses about their priorities for improving the checkout experience. Raising the number of available payment methods and increasing the speed of the checkout were the key takeaways. For these reasons, the number of businesses in Canada and the US that accept in-store payment by mobile wallets is expected to increase by more than 100% by next year, from a total of 29% to 62%.
Consumer appetite for peer-to-peer payments
Much as the adoption of contactless as a solution allowing more convenient commerce payments, consumers also now demand a secure, convenient alternative to cash when making payments to friends, family, or peers.
This is why demand for peer-to-peer payment (P2P) capabilities through digital apps has been a growing trend for a number of years, and in the US in particular, with quarter-on-quarter payment volume growth exceeding 20% for several industry leading providers in this area. It was predicted that 63.5 million Americans (32% of smartphone users) made a payment on a P2P app in 2017, according to eMarketer’s research. This figure grew to 82.5 million users in 2018.
So it is unsurprising that tech giants, including Google, Apple, and Facebook, have launched products that will continue to boost adoption of these apps. Industry commentators have predicted that the total transaction value of mobile P2P payments grew 37% in 2018 to $167bn, and this figure could rise to surpass $300bn by 2021.
Whether it is a payment via a P2P app on a smart phone, the rising use of mobile wallets or more sophisticated biometric technology for payment authentication on a mobile device, the future of payments is on the move – quite literally.
This article was originally published at www.paymentsbusiness.ca