The mobile payment wars are hotting up. Players are introducing smartphone apps, products that let you pay someone as long as you’re near them, and experimenting with NFC. Small wonder that the amount of money transferred via mobile is set to explode.
Of course mobile payments have been around for a while now. In emerging markets countries like Zambia and Kenya, people have been using their phones to transfer money since the early 2000s. It’s in the last couple of years that the world’s started to sit up and take notice.
Thing is, it’s taking notice in a big way. According to tech research company Gartner, global mobile payment transaction values will surpass US$171.5-billion in 2012, a 61.9% increase from 2011 values of US$105.9-billion. The number of mobile payment users meanwhile will reach 212.2-million in 2012, up from 160.5-million in 2011.
If the research company’s forecasts are accurate though, that’s just a fraction of what’s set to come. According to Gartner research director Sandy Shen, the mobile payments market will be worth US$617-billion with 448-million users by 2016.
That said, it won’t be easy for any one service or technology to dominate the space completely. Companies wanting to have a go at mobile payments have to cater their products and services to local markets that will be using different access technologies, business models and partners, and under different regulatory conditions.
Shen reckons this fragmentation will give smaller players a fair chance:
“There will be a few global players that have the scale and resources to serve large customers and the mass market whose requirements can be readily satisfied by standard solutions,” she says. “However, there will always be segments that cannot be sufficiently served by the global players. The demand of these segments can only be satisfied by specialised or local players who can better understand the segment and have specific solutions to meet the unique challenges”.
Gartner reckons that SMS will remain the dominant form of mobile payment for the next few years in emerging markets, while mobile web and WAP-based payments will come to dominate in developed markets. NFC payments meanwhile will only really start to come into their own by 2016.
“NFC payment involves a change in user behavior and requires collaboration among stakeholders that includes banks, mobile carriers, card networks and merchants,” says Shen. “It takes time for both to happen, so we don’t expect NFC payments to come into the mass market before 2015. In the meantime, ticketing, rather than retail payment, will drive NFC transactions.”
The kind of things people pay for with their mobile devices will also differ between developed and emerging market countries. In the former, merchandise payments e-commerce purchases where users buy online, as well as in-store purchases will come to dominate. Money transfer and airtime top-ups will remain dominant in emerging markets.
Gartner singles out e-tailers such as Amazon and eBay for driving mobile store purchases. It also expects a large number of merchants to introduce their own mobile payment services, trying to emulate Starbucks’ success.
In emerging markets, Gartner says, money transfers will account for the largest portion of the transaction value because of the demand for secure and efficient ways of storing and transferring money. Ticketing and parking also appeals across many markets because it can improve efficiency in transacting, as well as offering user convenience. In African and South Asian countries, for example, users can buy bus and railway tickets using a mobile payment service so that they can secure tickets earlier where tickets are often in short supply.