The domestic mobile payments market is expected to grow to $142 billion by 2019, according to Forrester Research; but even the world’s most powerful players in e-commerce and technology have had a difficult time winning the acceptance of U.S. consumers for an everyday “mobile wallet."
Last week, Amazon cut support for the beta release of its mobile app, Amazon Wallet, after just six months of testing. Other mobile services have endured slow growth, efficacy complaints, and data breaches.
But with the introduction of Apple Pay, the mobile payment marketplace may be back on track, particularly for in-person, near-field communication (NFC) payments.
Jim McCarthy, global head of innovation and strategic partnerships Visa, Inc., calls the Apple offering “a long-term tipping point for mobile payments,” the Wall Street Journal reports. And with more than 20 million iPhone 6 and iPhone 6 Plus handsets operating in the U.S., the tools to make mobile payments indispensable may finally be in consumers’ hands.
Why Apple Pay is a game changer
A little more than three months after its introduction, Apple Pay has rolled out services at 45 national and regional retail banks, with 500 more on its install list. National retailers and restaurants including Macy’s, Whole Foods, Walgreens, and McDonald’s are onboard, alongside dozens of smaller chains, specialty shops, and gas stations.
With a household and highly regarded company name attached to its mobile payments system, Apple has brought this type of technology into the limelight, slowly making it a recognizable option for customers at the checkout.
But it's not without competition
Apple is far from the only game in town. Wal-Mart, CVS and other members of the Merchant Customer Exchange (MCX) group have spurned Apple Pay in favor of the rival CurrentC app, which was developed by the group.
Online auction pioneer eBay will spin off its PayPal unit this year to capitalize on its name recognition in the online payments market, and Google Wallet is ramping up hosted payments services for small businesses through a partnership with WePay. Wireless providers are pushing Softcard to capture a share of the market, and rumors are swirling around Samsung's tentative announcement of its own Samsung Pay.
EMV standards may (or may not) help
Whatever systems come out ahead, acceptance of a true mobile wallet may be aided by the fact that merchants accepting credit cards will be subject to Europay, Mastercard and Visa (EMV) standards starting in October 2015, meaning terminals must accept European-style chip-and-pin cards.
During this transition, many EMV retailers may also opt to support the near-field communication (NFC) chips that make Apple Pay shine, expanding the number of potential mobile wallet acceptance points exponentially.
But EMV could also have the opposite effect on the mobile wallet's adoption by diverting fraud to online and mobile channels, thus undermining trust.
“The security around mobile apps is relatively immature,” says Scott Laliberte, managing director with the global consulting firm Protiviti. “Those standards are rapidly evolving, but it’s still a new frontier.”
While in-person payments will log the fastest growth to reach $34 billion through 2019, remote payments will still account for 64% of the larger mobile payments market.
As Forrester’s Denée Carrington warns, “adoption of mobile payments is an evolution, not a revolution”—but 2015 may be the year to start this evolution.