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Despite slower growth than previously expected, proximity mobile payments will top $1 billion in the US this year, according to new figures from eMarketer, before expanding rapidly to reach an estimated $58 billion by 2017.
eMarketer defines mobile payments as transactions for goods or services made by scanning, tapping, swiping or checking in with a mobile phone at the point of sale. Often characterized as a proximity or contactless payment, mobile payments occur in real time in the real world, and are functionally different than mobile commerce—the purchase of digital or physical goods on a mobile device.
Driven by consumers buying items like daily coffee via closed-loop payment systems, as well as an increase in bigger-ticket purchases made via smartphones, mobile payment transactions more than tripled from 2011 to 2012 in the US, eMarketer estimates, reaching $539 million that year.
Still, the market is growing slower than previously expected, as evidenced by eMarketer’s scaled back estimates of user adoption and transaction value from initial projections in October 2012. Delays and adoption issues facing numerous mobile wallet initiatives, as well as a congested landscape of competing technologies, materially affect eMarketer’s outlook on mobile payment transaction values, which will not top $20 billion until 2016. The previous forecast predicted mobile payments would top $20 billion by 2015. Additionally, low-value purchases will still comprise the majority of transactions in 2013, causing a dip in the growth rate.
These estimates are based on the following key assumptions and variables:
- In the near term, light users experimenting with low-dollar purchases will dominate the mobile payment audience; a smaller segment of heavy users who habitually buy their daily coffee, for example, with a mobile payment system will increase over the forecast period.
- The significant jump in total and per-user spending over the forecast period will be driven by consumers adopting mobile payments for a wider array of products and services constituting an equally broad gamut of price points. eMarketer views this diversification as critical to driving habitual consumption, which is crucial for moving mobile payments into the mainstream.
- Increased activity among these regular users is contingent on the assumption that more mainstream merchants will accept mobile payments of some kind. For example, NFC adoption remains a wild card. On the one hand, NFC-enabled hardware continues to proliferate. On the other hand, US mobile payment platforms reliant on NFC have, so far, failed to gain traction among consumers and merchants even as other methods and technologies have picked up steam. The failure of large-scale mobile payment schemes to take root in 2012 put many merchants and consumers in a “wait-and-see” mode, resulting in lowered estimates.
- Consumers will also need to find the experience of using a mobile payment platform sufficiently convenient and valuable enough to encourage repeat use. Integration of proximity payments with other mobile commerce activities will contribute to increased consumer awareness and use, encouraging uptake, while concerns about security and smartphone battery life will gradually ebb as consumers grow more familiar with the different systems available. Absent these conditions, the market may not develop as predicted in the model.
- While transactions and users have increased, a fragmented mobile wallet landscape could stifle the path to more rapid adoption. In contrast, if hardware and infrastructure impediments are resolved in a shorter timeframe, and adoption clusters around specific mobile wallets or payment mechanisms, allowing large-scale mobile wallets to make inroads with consumers and merchants, the proximity payments opportunity could accelerate at a faster rate.
Numerous forecasts tracked by eMarketer attempt to quantify the global mobile payments opportunity, although estimates vary widely based on the scope of how each research firm defines what constitutes a mobile payment, as well differing methodologies and assumptions of what will drive market growth. Players in the mobile payments value chain currently operate at a country-specific level due to local regulations and infrastructure considerations, meaning that regional perspectives can be more insightful than a global aggregate view.
Most researchers expect global mobile payments will reach transaction volume in the hundreds of billions of dollars by 2017. Despite these generally optimistic projections, discrepancies in scope, as well as downward revisions of past forecasts, underscore just how much the market is still in its early stages.