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Mobile Payments: Are We There Yet?

It’s happening, and banks need to be prepared.

By Michael Scheibach, Contributing Editor 

My apologies if you’ve heard this before. Mobile payments — aka mobile money, mobile commerce, mobile wallet, contactless payments — seem to have finally passed the tipping point, according to Juniper Research. Its report, “Mobile Wallets: Service Provider Analysis, Market Opportunities & Forecasts 2018-2022,” predicts that next year, 2.1 billion consumers worldwide will make a mobile payment or send money. That’s nearly 30 percent more than the 1.6 billion consumers in 2017.

The key question, however, is, “How many consumers will make a mobile payment in the United States?” Accenture Consulting’s report, “Driving the Future of Payments: 10 Mega Trends,” seems to support the findings by Juniper Research. According to Accenture, 68 percent of U.S. consumers plan to use a mobile wallet by 2020. A survey conducted by TSYS also found that 68 percent of respondents — those who had activated a mobile wallet or intended to do so — definitely plan on making 50 percent or more of their in-store purchases using a digital wallet. And RJ Horsley, writing for Payments Journal, suggests that in-store mobile payments will overtake credit cards by 2020, amounting to more than $500 billion.

If these various reports, surveys and predictions can be believed, and not be another case of déjà vu (as in, haven’t I seen this act before?), mobile payments may finally become a major factor in the payments industry after nearly a decade of promises. This is also the view of Ashley Wells with Corporate Spending Innovations, who lists mobile payments as one of her key payments trends.

“Companies have started to introduce more mobile-friendly payment portals for their customers,” Wells says, “giving them even more flexibility and mobility around automated controls in the process. Settling invoices with record speed and in real-time will be the next advancement as we see accounting software integrating seamlessly with mobile technologies.”

Everyone agrees that mobile is the lowest-cost channel on a per-transaction basis for banks — 8 cents vs. $4 for a branch transaction by some estimates. So banks should benefit greatly with the increasing use of mobile payments. But wait. As Accenture and others point out, consumers want more than simply the ability to make a mobile payment; they want the ability to see the status of all their checking and credit card balances at one time, in one location, without logging in and logging out of different accounts.

“Consumers are desperate for a different breed of mobile payments options,” reads the Accenture report. “One of the value-added services that . . . will gain traction in the coming years is a single view of account information. This is possible with a mobile banking app that allows consumers to see all checking and credit card balances at one time.”

Question number two: “Are we there yet?” The answer is “quite possibly,” with a word of warning. Although consumers today are comfortable with using their bank’s mobile app, the risk going forward is the introduction of mobile payments apps by aggregators that achieve this unified view of a consumer’s finances. Banks are already dealing with nonbank providers of mobile payments such as Google, Apple, Samsung, Stripe, Square and PayPal. And the list continues to grow. Banks must ensure that their customers don’t abandon their current mobile app in favor of a more complete financial app.

“Banks are essentially two APIs away from losing a big chunk of their mobile app traffic,” says Accenture. “Delivering this unified mobile payments experience will become ground zero in the battle over customer experience between traditional players and third-party payments providers.”

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