Next year, consumers will continue to adopt and trust online payments and mobile wallets. Vendors will rapidly embrace mobile Point of Sale (POS) applications. International, digital-savvy early adopters will keep reaching for convenience and cost savings via fintech companies and cryptocurrencies.
Online Payment Methods (PayPal, Amazon Payments, Google Wallet, Dwolla, Venmo, Stripe, etc.)
Companies across the spectrum compete for user transactions in this growing marketplace. Even Facebook Messenger has thrown its hat into the ring.
As recently as June 12, 2017, five of the biggest U.S. banks: Wells Fargo, BOA, Capital One, U.S. Bank, and Chase (and many others) have banded together to offer Person-to-Person (P2P) services under the Zelle brand. Unlike other online payment systems, Zelle typically runs within banks’ existing websites and apps. Because of Zelle’s association with participating banks, it increases security by avoiding third-party transactions. First-time users (especially older) users may gravitate to Zelle for this added layer of protection.
“I would say it is a really good time to be in P2P. There is a lot of interest, and I think mobile adoption is propelling that interest. The goal now, she said, is to move that interest out more broadly — and make the P2P payment a tool that is ready to work more broadly in the marketplace.” – Lou Anne Alexander, Early Warning Group President of Payments
Mobile Wallets (Apple Pay, Samsung Pay, Android Pay, Google Wallet, Masterpass, Walmart, Target, Ali Pay, WeChat Pay, etc.)
As you can see from the extensive list above, the major players in the retail sector have lined up to compete for mobile wallet market share. Consumer trust in mobile payment systems is growing rapidly, signaling a surge in mobile wallet use. Industry researchers anticipate an astounding 80% Compound Annual Growth Rate (CAGR) from 2015 to 2020. This growth in transaction volume will likely surpass half a trillion dollars.
Analysts predict the number of in-store mobile payment users will climb steadily, to the tune of a 40% CAGR from 2015-2020. By then, roughly 150 million people will be using mobile devices to make in-person retail purchases.
Mobile device payments also offer certain fraud-prevention measures that protect consumers’ credit/debit account numbers.
“When you make a purchase, there is a token that is applied to the transaction…The merchant does not know the card account number.” – Greg Domaracki, PNC Bank
Mobile POS Devices (Square, PayPal Here, etc.)
The accessibility of Mobile Point-of-Sale (mPOS) technology has changed the game for retail outlets. Today’s consumers expect to be able to use their credit/debit cards virtually everywhere, creating a strong demand for access to this convenience.
By 2019, over 50 million mPOS devices will be in place. By then, almost half of all POS systems will be mPOS devices. However, experts predict a hybrid future which included both mPOS and traditional “checkout lanes,” depending on the needs of particular retail outlets.
“The mPOS market does present a substantial opportunity for not only the expansion of point of sale solutions by those vendors already active but also by new OTT players who could come into the payments space…”– Phil Sealy, ABI Senior Analyst
Fintech Corporations, Cryptocurrencies, and Cross-Border Transactions
Cryptocurrency and fintech companies have challenged traditional assumptions about cross-border exchange systems and rates. As more and more people travel, live, and do business internationally (and via the Internet), financial institutions are scrambling to serve this budding demographic.
Hiring freelancers and digital nomads allows companies to see massive cost savings in infrastructure and overhead. According to Legal Edge founder Donna Sewell, “…in the last 12 months, we have halved what office space we did have to a modest two-desk room for a team of 15 lawyers.”
People who work online and travel, as well as migrant workers, face one significant hurdle: managing payments and accounts in a variety of currencies. Venture capitalists who invest in overseas companies can have a difficult time funding their partners. Fintech companies that serve these consumers take market share from traditional banks by offering flexible fees and multi-currency accounts.
Cryptocurrencies provide pressure from a different angle by competing very favorably with banks on transfer rates. For example, Bitcoin offers cross-border transfers around 1%, saving consumers 2-3%. According to Bernard Kaufmann, Payment21 General Manager, “…banks on both sides of the Atlantic have not found a functional system model to make faster payments possible…There is no incentive for them because customers are not ready to pay for faster services.”
By serving the customers who are ready to pay for faster services – and offering lower fees than traditional banks, fintech companies are changing the face of modern banking. By presenting new options certain consumers desperately need, they provide incentives for these early adopters to try out new systems and currencies.
“The vast majority of banks and fintech companies have been built within one country, and their goal is to solve problems inside one country…We are coming at this from the perspective of hundreds of millions of people who don’t live in just one country — the hundreds of millions who lead international lives.” – Joe Cross, TransferWise General Manager (U.S.)