Significant progress has been made in the US and European markets in terms of mobile payments, which we explored in our previous article, Mobile Payments – Have they met expectations? In that article Natasja Bolton examined whether mobile payments had been gaining acceptance in the market place with consumers and businesses alike. She established that though progress has been made there are still barriers, as regards to businesses adapting to the changing payments landscape.
In comparison, China has made huge leaps as in large cities, like Beijing, it’s now possible to pay for more or less everything using only a smartphone. In fact, a Forbes correspondent recently did just that and documented her day walking around Beijing, finding that from paying at small food stalls, for bike rental or for a taxi journey right through to getting a loan or paying for utility bills, all could be done using only a smartphone. It’s not surprising therefore that mobile payments market in China reached $5.5 trillion in 2016.
In comparison, the US spent $112 billion using mobile payments during the same time period, according to consulting firm iResearch as reported in the New York Times. Amazingly, this change has occurred over the last three years, facilitated primarily by WeChat Pay, a function of China’s most popular social media app, and Alipay, a Chinese mobile payment provider. Last year the use of phones to purchase goods and services at a point of sale (POS) more than doubled and is predicted to keep on growing.
What’s driving the growth?
So what’s the main thing driving this growth in China? According to market research firm eMarketer, it would seem that coming late to the party was an advantage: “China’s rapid adoption of proximity payments is in part thanks to its late-mover advantage—unlike the US and other regions, China does not have a strong entrenched credit card culture. In effect, China has jumped directly from cash to mobile payments.”
Industry experts are predicting that other emerging markets may also skip a whole generation of financial services by using fintech mobile solutions. For example in Africa, where it’s estimated that up to 80% of the continent don’t have a bank account and that up to 90% of retail transactions are made using cash, there is an opportunity for fintech start-ups to bridge the gap.
Unlike China however, many African nations do have substantial infrastructural challenges to overcome which could hinder development. India on the other hand is not far behind China, with m-commerce already making huge strides and fintech companies like Mswipe already offering mobiles POS solutions to small business owners. It is predicted that the market for mobile payments and mobile banking will also grow as the Indian government actively promotes financial inclusion.
If these emerging markets develop and grow in the same vein as China, this could mean serious growth opportunities for businesses that offer and accept mobile payments. In the US and Europe however, there is a long history of using credit cards and breaking old habits can be difficult. It would seem that consumers in western countries and in particular smaller businesses are overall less motivated to adapt or try new ways to pay.
On the one hand consumers appear concerned about the security of mobile payment methods and on the other hand many businesses do not offer consumers the ability to shop and pay anywhere, anytime, using a mobile device. To take advantage of the predicted growth in mobile payments, businesses need to keep up with the changes in the payments space while at the same time highlighting to consumers that their mobile payments are secure.
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