Will the Accelerating Mobile Payment Be a Part of Our New Normal Completely?
What can we observe when the pandemic’s contactless behavior is shaping the cashless world?
What’s innovative about it?
For those who have experience using the subway in New York City, a lot might have faced the same frustration about the thin and fragile MTA card. You either have the experience of losing it or damaging it even though you keep it very properly and safe. Then earlier this year, MTA launched a new payment system, OMNY that allows riders to just “tap & go” with their credit/debit card or smartphone, introducing contactless payment in the public transportation system for the first time. “It’s so easy, I love it,” said a rider “I wish it was at my home station.” Not only that we can use mobile payments in our everyday ride, but also in our everyday coffee grabbing or grocery shopping. It has become more immersed in our everyday life. And the stats have proven this continuing rise.
According to the Global Mobile Payment Users 2019 by eMarketer, more than 1 billion people worldwide were predicted to use a mobile payment app by this year, 36.6% of smartphone users, predicted to make an in-store mobile payment. With the annual growth rate of 23.2% during the forecast period, this will drive the market to $3,081 billion forecasted-size by 2024 and is predicted to make mobile payments becoming the second most common payment method after debit cards by 2022.
If we look at the adoption breakdown by country, China is in the lead with more than 80% mobile payment users, while the second country, Denmark, follows at around 41% which is only half of China’s widespread adoption. Why is it getting so popular?
What drives this growth?
Apart from the pure benefits, such as convenience and mobility of not having to carrying cash, counting small money, dealing with changes, or risking taking out credit cards, the early adopter markets share many common factors contributing to this growth. They have one to two dominant players for example in China, which are AliPay by Alibaba and WeChat Pay by Tencent. They also have high levels of mobile shopping and buying and mobile payments facilitate all these transactions. Other main drivers are government initiatives, widespread smartphone usage and cultural factors. In the US, after the first launch of Apple Pay in 2014, it has gradually enjoyed the faster growth overtaking Starbucks to become number 1 in mobile payment platforms last year. We can see the market will continue to heat up.
What could be the potential barriers?
There are some drawbacks that could still slow down the adoption of mobile payment. Many consumers still have concerns about safety. According to research from Simon-Kucher & Partners, US consumers believe mobile payments are not as safe as traditional methods. 89% of US consumers preferred to pay by cash, credit card or debit card over mobile. And only 22% of US consumers asked in the survey described mobile payments as “well protected”, reported by Pew. In some markets, consumers also have some concern that sensitive information is collected and stored each time they pay by phone, and that means they are placing trust in the robustness of providers’ security measures.
Another drawback is actually the flip-side of this cashless ecosystem. How? I had the first-hand experience with this myself when I visited China last year for a business trip. Hangzhou, the headquarter city of the giant tech, Alibaba, is the city that is highly cashless. Everything from buying a bottle of water to getting a taxi or even a boat ride, you have to pay via mobile ONLY. (scanning QR code) I was there as a visitor so without a Chinese bank account, foreigners cannot do so.
What could happen to the mobile payment market with the effect of COVID-19?
One more factor to be considered in this growth equation of mobile payments is our current situation about COVID-19. We can take China as an example considering the high adoption usage and the coronavirus situation that broke out there first. Once the city was shut down, the physical stores were closed and it immediately affected the mobile payment market that the great contribution is through offline in-store transactions. However, the CEOs see this as more of a one-off loss and the market will strike back. Alibaba’s Chief Executive Officer, Daniel Zhang, has sent a resolute message that the firm’s AliPay will indeed be hurt, but it will be a one-off event. James Mitchell, Tencent’s chief strategy officer, said that the businesses were already rebounding with “supply coming back, although there is still some suppression in demand.”
Also, in the long run, mobile payments could play a vital role in the exchange of transactions. It is contactless and definitely helps lower the risk of transmission. While all of us are more aware of health and hygiene, mobile payments can then be a part of the new norm of our payment methods in an attempt to cope with this health crisis.
What does this mean for businesses?
As mobile payment usage seems to still stick around or even is accelerated by the COVID-19’s shaped human behavior, businesses need to adjust themselves quickly. Reported by Kount’s the sixth annual Mobile Payments and Fraud Survey in 2018, only *37% of the merchants that participated already supported mobile payments at the Point of Sale (i.e. via NFC, Mobile Web, Mobile Wallets, etc.) and 31.4% planned to add to this feature or increase it. This simply means 63% of non-available mobile payment support will have to ensure they are equipped with this especially after the world reopens.
