The mobile payments space is accelerating: here’s how

Did you know that there are 5-billion mobile subscribers around the globe? And that in developed markets like America more than half of all cellphone owners (56%) are now classified as smartphone owners and use ‘smart’ mobile phones running iOS, Android or Windows systems. That increase is up from 46% a year ago, and 35% in 2011. About 35% still have so-called ‘dumb’ phones that aren’t connected to a wireless operating system. And while that percentage is much higher around the globe, it’s shrinking rapidly And fewer than 10% of adults don’t own a mobile phone.

More of us are using our mobile devices to buy stuff. We can buy products and services without carrying a physical wallet containing credit cards, debit cards and cash. All it takes is our connected bank account, or security codes and the will to purchase. The age of instant gratification is upon us!

Mobile payments really began to take off in 2012, with 47% of smartphone owners using mobile shopping apps in 2012 to make a purchase, according to Nielsen. Not surprisingly, the most popular retailers for purchases using mobile devices in 2012 included eBay Mobile, Amazon Mobile and Groupon. These retailers make mobile purchases easy for consumers with convenient checkout options and the ability to navigate their sites for products with ease.

Purchases through these mobile apps comprise just one type of mobile payment. According to Mobile Payments Today, there are five different types of mobile payments:

1. Mobile At Point of Sale: This is what has been coined the “mobile wallet,” including the popular “tap-and-go” method of payment. Popular providers of this method include Google Wallet, Visa and Mastercard.

2. Mobile As Point of Sale: With this method, the mobile phone itself acts as a cash register. This allows merchants to process business credit cards on a mobile device. Popular methods for this type of mobile payment are VeriFone and Square.

3. The Mobile Payment Platform: This catch-all category covers any method of payment that allows a consumer to send money to a merchant or another consumer. This type of mobile payment includes the popular PayPal.

4. Direct Carrier Billing: This method charges a payment to the consumer’s cell phone bill. The consumer gets the product immediately, but does not pay for it until they get their cell phone bill. Examples of this type of mobile payment include PaymentOne, zong, boku and mopay.

5. Closed Loop Mobile Payment: This is when individual merchants create their own mobile wallet or platform. Starbucks created its own mobile wallet platform and did 3 million transactions in their first 2 months after launching it.

Rising Number of Mobile Payments Expected

Obviously as the number of smartphones increases in ownership and usage, the number of mobile payments will grow. Even today, more customers are using their mobile devices for financial transactions and mobile payments. And the numbers keep growing — a March 2013 IDC report indicated a 1.5 billion smartphones will be shipped globally by the end of 2017. Per a study by Yankee Group, mobile payments will account for US$1-trillion worth of global transactions by 2015.

People will likely continue to see mobile payment platforms make deals with big brands such as Mastercard or Visa as mobile payments continue to be more popular. Convenience and ease of use for both the consumer and merchant will be key for any mobile platform.