Consumer and Merchant Acceptance of Mobile Wallets Continues to Rise

Juniper Research envisions that total global mobile wallet transactions will reach $1.35 trillion in 2017, up 32% from last year’s $1.02 trillion. This growth continues to be spurred by both consumer and merchant acceptance of the digital payment option, as both players become more comfortable with the technology and begin to see its impact on POS transaction speed and overall convenience and security.

Key Digital Payment Drivers

This is especially true in the US, where merchants were later to the game in rolling out EMV capabilities. Chip-and-pin transactions, which take 7-10 seconds, have brought friction to the payments process and have prompted, for many, a second look at the contactless (and only 2-3 second) mobile payments. Learn more about this inclination in Did the EMV Liability Shift Give a Big Boost to Mobile Payments?.

What’s more, as the industry evolves, awareness of wallet and app-based mobile payment solutions is building, thanks largely to the enthusiasm of large US banks and their mobile money management and payment offerings. (Explore this further in What’s Next in Bank-to-Bank Real Time Payments.) Consumers in other global economies, particularly in emerging markets lacking widespread traditional banking services, are already engaging in mobile commerce at much higher rates.

Showing global mobile wallet adoption, BCC Research projects that the market will reach $635 billion by 2020 and increase at a five-year compound annual growth rate (CAGR) of 41.1%. Regionally, they expect…

• the North American market to reach $158.8 billion in 2020, demonstrating a five-year CAGR of 36.1%
• the EMEA market to total $260.3 billion in 2020 on a five-year CAGR of 41.8%, and
• the fastest-growing Asia-Pacific market to total $165.1 billion in 2020 on a five-year CAGR of 45.9%

The Mobile Wallet War Wages On

The mobile wallet marketplace is still young, so there’s lots of room for innovation and progress; and as of yet, there are no clear-cut winners. That’s not to say the marketplace isn’t intense. Jupiter Research provides battleground insights in their recent report, War of the Wallets, presenting the 12 leading wallet providers:

• Alipay
• Android Pay
• Apple Wallet
• Masterpass
• Orange Cash
• PayPal
• Paytm
• Samsung Pay
• Visa Checkout
• Vodafone M-PESA
• Vodafone
• Weixin (WeChat)

The mobile wallets getting the most attention—at least on a global scale—are those from Apple, Samsung, and Google. By the end of 2016, according to Juniper Research, their services were available in 13, 8 and 9 markets, respectively, and their collective active user base reached an estimated 74 million by the end of 2016. And their primary challenger is PayPal, for which 28% of its 1.37 billion transactions in 2015 occurred on a mobile device.

Juniper Research suggests that to gain global market share, mobile wallet providers need to focus on “…providing an integrated wallet experience, allowing consumers to use their stored payment credentials for both proximity and remote payments, whilst also enabling related services.” These services include targeted loyalty programs that make mobile payments more valuable.

Additionally, merchant infrastructure needs to be addressed, especially in the US, where a significant number have not implemented the necessary POS technology. Among US merchants, according to the 18th annual edition of the Boston Retail Partners’ POS/Customer Engagement Survey, Apple Pay has the largest acceptance rate (36%, up from 16% last year), with 22% of retailers planning to accept the service in the next 12 months and another 11% planning to do so within the next one to three years. Still, 31% are adopting a “wait and see” approach. Here are the other leading wallets and their acceptance rates:

• PayPal(34%)
• Mastercard PayPass(25%)
• Android Pay(24%)
• Visa Checkout(20%)
• Samsung Pay(18%)
• Chase Pay(11%)
• Private label mobile wallets (4%)

2016 Mobile Payments State of the Industry provides more insights into the mobile wallets marketplace.