Mobile wallet POS payments are expected to grow exponentially by 2020, is your company prepared for the demand?
There is a paradigm shift in the digital payments landscape. Given the array of digital payment technologies that are constantly evolving, the manner in which we pay for things will subsequently evolve as well. These days, the migration from paper/cash payments and plastic credit card charges to digital payments only continues to gain momentum.
For those who may not know, a mobile POS is a wireless device that serves the function of a traditional cash register. It’s important to note that it refers to both the hardware and software used for payment.
A perfect example of this is ShopKeep, the iPad-based POS system that’s used by a number of small businesses.
Mobile POS work in conjunction with mobile wallets, which is the software on a wireless device that stores credit and/or debit card info and allows for digital payment. For many businesses, the end goal is to use technology like NFC (near field communication) to turn smartphones into mobile wallets.
The surge in popularity
Overall, the market for digital payments is ripe, growing, and quite large at this point in time. By the end of this year, nearly one in five smartphones will use mobile payments—a 210% growth from 2015. In fact, according to CB Insights, funding-to-payments startups have reached $3.8 billion in 2015. These numbers show that investors in this technology are betting on the advancement and mass appeal that digital payments will have in the future.
Several factors are accounting for this exponential rise in mobile wallets. Google Wallet, Apple Pay, Samsung Pay, and Android Pay are some of the more popular digital wallet options in circulation today. These options will soon become standard on all smartphone devices.
As the popularity of digital payment options grows, more retailers and merchants will implement POS systems that accept mobile wallets. From there, companies will want to provide loyalty programs, discounts, and other incentives that will be integral to keeping current digital payment users—and attracting new ones. As more and more users see the convenience and ease of digital payments, the more likely it is that purchases will increase.
While the current success stories around digital payments may be scarce, we are seeing noteworthy cases in action. Specifically, the successes of Starbucks or Paypal stand out. During the first quarter of 2016, over 21% of total U.S. transactions for Starbucks were paid using the mobile apps. Starbucks now processes more than 8 million weekly mobile app payments, which account for 16% of all transactions. Then, in 2015, Paypal’s annual mobile payment volume reached $66 billion.
Most of the digital payments mass adoptions are of the retail variety. Which makes sense considering there is a well-established purchase cycle with defined merchants and consumers in retail. The user experience is seamless—it’s not just a part of the purchase, but embedded into the interaction.
As more people adopt digital payments, it’s paramount for businesses to ensure that these online transactions are secure. Multiple measures are taken by individuals to secure their personal information. Companies could potentially use biometrics or facial recognition to ease security concerns users may have.
However, as witnessed by the growing number of digital payments made year after year, the level of convenience that digital payments provide cannot be ignored solely because of security concerns.
A growing number of users
There are a number of different players fostering the shift in payments to digital: card networks, smartphone manufacturers, payment providers, digital startups, banks, and retailers. All of these groups are fostering and driving growth in digital payments. In 2015, a survey of payment industry leaders found that 82% of card networks and 78% of smartphone manufacturers are driving growth.
The rise of contactless transactions is perpetuating the digital payments movement. As consumers become increasingly comfortable and confident in their online purchases, it will lead to a movement from more physical payments to digital payments. Furthermore, the advances in digital payment offerings via mobile POS have made digital payments even more accessible to all. Companies like Square are enabling merchants to accept payments via mobile devices. The success of Square has helped jumpstart a transformation in payments at the POS. In actuality, Square is processing $15 billion payments annually.
Mobile payment options are exponentially increasing and there does not appear to be any hurdle that can stop its momentum. On the whole, many users are satisfied with how they interact with their current banking system and feel it addresses their needs, which we as innovators interpret as ready for disruption. Innovators will continue to iterate on their proposed solutions to solve the current issues and silence the naysayers by providing the optimal mobile payment strategy solutions to users.