Future of Payment Industry

In recent years, the distribution of advanced mobile technologies, especially smart phones, consumers are becoming more used to the fact, that the phone can be used to transfer the money, to buy a commodity or make other financial transactions.


A recent study by the Internet Pew Research Center found that one in ten Americans at least once donated money to a charity project by sending a text message on your phone, that more than a third of smartphone owners have used their device for banking services – pay bills or check your balance, and that 46 % of all purchased their applications were purchased from mobile devices. According to a study comScore, 38% of smartphone owners made with their gadgets or another purchase. The most popular categories are mobile retail digital content (music, e-books and movies), clothing and accessories, tickets and discounted products.

Published in 2012, the report of the U.S. Federal Reserve also shows that 21% of mobile phone owners use mobile banking services in the past year and that another 11% plan to use them in the next year. The most popular service was checking bank balance and transaction history of the past (she used the 90% of those who use mobile banking services). In second place – the transfer of money between different bank accounts (42%). Another 12% in the last year made by its mobile payments: Pay bills on the World Wide Web, or transfer of funds to the account of another person.

Mobile phones play an even more important role in the financial systems of developing countries. In Kenya, for example, has a system of SMS-money transfer M-Pesa, which users per year to send each other an amount equal to 20% of GDP.

In light of these trends, many financial institutions and technology companies have decided to do the integration of mobile devices in the multibillion economy retail trade and services. As a result, in recent years a rapid development of infrastructure and tools for secure mobile shopping.

Today there are several types of solutions for mobile payments and transactions. Some allow sellers and traders “on the fly” to accept payments by credit cards – used mobile card readers that connect to your smartphone or tablet. Others give the ability to directly transfer money from person to person through mobile phones – you need to either physically touch one device to another, or to exchange phone numbers or email addresses.

There are other, even more advanced solutions to make the mobile phone the main instrument of the financial life of the user, combining the functions of a payment device, system identification, coupon books, and a financial planner. In late 2011, Google in conjunction with Citibank and MasterCard launched Google Wallet. Using near field communication technology (near-field comminucation, NFC) Google Wallet allows users to save payment information in the cloud and pay for goods retailers participating touching your phone device in the store.

A consortium of Verizon, AT & T, T-Mobile, Visa, American Express, Discover and MasterCard, this year runs ISIS – a similar payment system, also based on the technology of NFC. In the pilot phase the system is operating in some U.S. cities. PayPal and Visa also announced plans to enter the market with mobile wallets, and many analysts expect that in the near future to develop its own similar service notifies Apple.

Supporters of the “mobile wallets” argue that these systems have several advantages over traditional methods of payment – cash or credit cards. According to them, the mobile wallets of more simple and easy for the consumer, which is enough to carry one single device, replacing various pieces of paper and plastic. Since these devices are “aware” of the user’s location and can track its customer behavior in real-time, mobile wallets can offer advanced services “personal shopping” (for example, recommendations and special offers based on the data on the user’s location and history of his purchases ) and more targeted programs to encourage loyalty, more targeted promotional offers from sellers (modern cards “buy ten – get one free” card only now digitally stored in the cloud).

However, critics believe that a number of factors can interfere with the triumphal march of mobile payments. First of all, not everyone uses smartphones. Many analysts also question the fact that the company’s credit card abandon the current system, which gives them greater profits in developed countries. There is another problem: lack of protection from hackers NFC, market fragmentation and lack of interoperability between different mobile financial systems and multiple platforms. One more question – whether they want consumers to information about their private financial life is in the cloud storage.

In light of these disputes Pew Internet Project and the center of “Imagining the Internet” (Imagining the Internet Center) at the University of Elon asked experts and online activists to share their predictions and thoughts on how we can look “wallets” in 2020.

Most respondents agreed that by 2020, almost all people will always use the mobile devices for payment and that the need for cash and credit cards will disappear almost completely. These experts believe that the explosive growth of the market for smartphones and other mobile gadgets – along with the convenience, safety, and other advantages of Mobile Payments – make this system the obvious choice for everyday commerce.

At the same time, respondents have different views on the question of how much time it will take mobile payments to supplant conventional methods. Some experts believe that the process will go along with the change of generations younger users easily give up cash and plastic cards, while their parents and grandparents will move to mobile payments more slowly if they are at all.

65% of respondents agreed with this statement:

By 2020, most people will accept and will make extensive use of mobile devices to make purchases, and the need for cash or credit cards almost completely disappear. People will trust personal devices and programs for monetary transactions, relying on them to make purchases both online and in real stores. Cash and credit cards are almost completely cease to be used in most of the transactions, realized in developed countries.

33% of respondents agreed with the opposite statement:

People will not trust the near-field communication devices, and general transition payments exclusively to digital will happen. By 2020, payments using mobile does not win very popular. Possible security issues cause consumers too many questions and concerns for the safety of their money. People do not want the technology companies to receive more information about their purchasing behavior. Cash and credit cards will continue to be the main means of payment in the developed countries.

While 65% agreed that by 2020, people will rely on their mobile devices as tools for virtual and real payments, many experts explained that in reality the future will combine the features of both the scenarios. Respondents were asked to choose one of two diametrically opposed options without offering a third, to give them an opportunity to reflect and share their thoughts about a possible future.

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