Despite the fact that they received plenty of media attention during the past few years, "proximity" mobile payments, or mobile payments made at retailers' points of sale (PoS), have yet to hit the mainstream. Multiple reasons why exist, but perhaps the most significant roadblock thus far: Today's mobile payment systems simply don't offer a strong enough value proposition to compel consumers to use them consistently.
To date, the market has seen four alternative-payment success stories, according to Penny Gillespie, a research director of digital commerce with Gartner: PayPal, for online payments; Visa Signature debit cards; payroll cards; and gift cards. Each option offers "strong value propositions to consumers, as well as to merchants," Gillespie says, because they provide something new and beneficial that wasn't available before. Gift cards, for example, let consumers to easily send funds to friends and family, they make it easy for recipients to spend that money, and they drive recipients to stores, which benefits retailers.
However, mobile payments and wallets generally don't offer compelling reasons to use them, beyond the initial coolness factor and perhaps the ability to save a few seconds at checkout, according to Gillespie. "If you want consumers to do something different, the experience has to be as good or better than the previous experience," she says. "That means giving them something they didn't have before."
Some consumers do use mobile payments, but …
Recent data suggests that at least some consumers are interested in mobile payments, and that usage is on the rise.
Approximately 27 percent of U.S. smartphone owners say they used Apple Pay, Android Pay or Samsung Pay at some point, according to a study conducted in March 2016 by Auriemma Consulting Group, which focuses on payments and lending. Another recent study from research firm Phoenix Marketing International found that 32 percent of U.S. credit cardholders with smartphones have loaded a credit or debit card into Apple Pay, Android Pay, or Samsung Pay. Among those respondents, 67 percent were millennials and 50 percent were Gen-Xers.
In 2015, $8.71 billion in mobile payments were made in the United States, according to an October 2015 report from eMarketer. The total for 2016 is expected to surpass $27 billion. And Forrester estimates that U.S. consumers will spend $83 billion via mobile payments in 2016, a figure that's expected to increase to $142 billion by of the end of 2019, according to a report from Forrester Principal Analyst Brendan Miller.
While the future of mobile payments may be bright, many challenges must still be overcome, including the follow seven significant hurdles.
1. Mobile payments aren't seamless
The proximity mobile payment process is still not the seamless, "frictionless" experience it needs to become to gain widespread adoption, according to Forrester's Miller.
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