Mobile payments reached $12.84 billion in 2012 and will grow 601% to $90.05 billion in 2017, Forrester Research Inc. says.
Forrester divides mobile payments into three types: mobile proximity payments, mobile peer-to-peer payments and remittances, and retail and travel mobile commerce via smartphones.
Proximity payments, by Forrester’s definition, include in-store payments made via a mobile phone. These include payments made via Near Field Communication, or NFC, wireless technology, where a smartphone with an NFC chip can be waved past a payment terminal equipped with an NFC reader. They also include bar code scanning payments like those conducted by Starbucks customers, who open an app that generates a two-dimensional QR code that a cashier scans to charge the customer, and payments made through companies such as Square, which offers a credit card reader that plugs into a smartphone and connects to an app to take payments.
Mobile proximity payments reached $549 million in 2012, Forrester Research says. They will increase 93.1% to $1.06 billion in 2013, 256.6% to $3.78 billion in 2014, 317.7% to $15.79 in 2015, 75.2% to $27.66 billion in 2016, and 47.5% to $40.81 in 2017, the firm predicts. That’s a compound annual growth rate of 49.4%.
It will take a little time for proximity payment systems to reduce barriers to entry for early adopters, writes Denee Carrington, a Forrester Research analyst, in the report titled “U.S. Mobile Payments Forecast, 2013 to 2017.”
“Historically, in-store contactless payments have suffered from the classic chicken-or-egg standoff, with merchants waiting for consumer adoption and vice versa, but we are headed toward a truce. 2013 will be a year of testing and learning,” Carrington writes. “Product strategists will continue to refine their offerings to deliver meaningful benefits that outweigh the associated costs for early adopters, both merchants and consumers. Early adopters will begin to trial one or more solutions with relatively low barriers to entry and challenge the products to deliver a better experience than simply swiping a card or paying cash.”
Proximity payment systems in the years ahead will increase convenience and deliver clear consumer benefits, Carrington writes.
“We expect the fastest growth to be with lower-cost purchases and in contexts where mobile proximity payments offer greater efficiency and convenience over other methods of payments, such as: 1) an alternative to cash transactions such as vending, parking, transit and smaller retail transactions; 2) in restaurants where customers frequently have to wait in line or wait at the table to pay; and 3) with retailers that have integrated access to coupons, offers and rewards into the payment experience,” she writes.
Mobile peer-to-peer payments and other mobile remittances, Forrester says, include when one consumer uses a smartphone to send funds to another consumer and when consumers use their smartphones to pay bills.
Mobile peer-to-peer payments and other remittances reached $709 million in 2012, Forrester Research says. They will increase 76.3% to $1.25 billion in 2013, 43.2% to $1.79 billion in 2014, 36.9% to $2.45 billion in 2015, 32.7% to $3.25 billion in 2016, and 29.8% to $4.22 billion in 2017, the firm forecasts. That’s a compound annual growth rate of 42.87%.
This form of mobile payment won’t grow as fast as proximity payments because it’s generated little profit for companies that have invested in it, Carrington writes.
“The use case for immediately sending money to another person instead of using cash, writing a check or waiting to get online is easily relatable,” she writes. “Despite this, the tech archives are full of failed P2P solutions. Mobile P2P providers, such as Dwolla, PayPal and Venmo, that have had the greatest staying power rely on other sources of revenue to fund their consumer P2P service. Many banks have developed P2P services as a means to deepen customer engagement by consolidating their financial transactions. We expect to see few new competitors in this space.”
Further, mobile bill payment capabilities are still nascent, Carrington writes. “As biller capabilities improve and mobile banking features and usage increase, we’ll see greater adoption of mobile bill payment among consumers who value the anytime, anywhere convenience that mobile delivers,” she writes.
The third type of mobile payment, retail and travel m-commerce via a smartphone, occurs when a consumer makes a purchase via a web site or app on their phone.
M-commerce mobile payments hit $11.58 billion in 2012, Forrester Research says. They will increase 56.8% to $18.16 billion in 2013, 37.7% to $25.00 billion in 2014, 28.2% to $32.04 billion in 2015, 20.6% to $38.65 in 2016, and 16.5% to $45.02 in 2017, the firm predicts. That’s a compound annual growth rate of 31.20%.
As consumers try mobile shopping and gain confidence in it, there will be an increase in mobile shopping products and services that make it more convenient, Carrington writes.
“One barrier to mobile shopping is the friction involved in the checkout and payment experience,” she writes. “It can be cumbersome on a mobile device and can impede purchase conversion, but there are a growing number of mobile payment solutions that intend to streamline this experience by providing auto-fill and quick checkout solutions. One such vendor is Payfone, which has a 1 Touch Checkout experience, similar to Amazon.com’s 1-Click checkout, and securely transfers the mobile shopper’s payment credentials from their bank to the merchant during checkout.”