In the world of financial technology - or FinTech as it is sometimes called - there are many options available to help consumers and businesses make paying for goods and services easier. According to a study conducted in March 2016 by Auriemma Consulting Group, about 27 percent of US smart phone owners have used some form of mobile payment, including Samsung Pay, Android Pay and Apple Pay.
In 2015, over $8 billion in mobile payments were made in the United States alone, according to an eMarketer report. The total for 2016 is expected to be in excess of $27 billion. With numbers like these, retailers and financial companies recognize the impact of this market and are jumping at the chance to include mobile platforms among their payment options.
Mobile banking and other nontraditional payment services have become increasingly popular particularly among unbanked and underbanked consumers. More than half of unbanked individuals use some sort of alternative payment service, according to a recent survey conducted by the Federal Reserve.
Underbanked individuals are defined as those who you don’t have a bank account at all. They typically use alternative financial services including refund anticipation loans, payday loans, check cashing services, and a variety of other financial transactions that are handled outside of traditional bank settings. Mobile payments have made it infinitely easier for these individuals to pay bills, manage their finances, and send money to relatives and friends.
Benefits for Consumers
Consumers benefit greatly from mobile payments because they are able to travel light, have their card information readily available, and enjoy a quicker checkout process. Consumers don’t have to worry about losing their wallet and not being able to make a purchase and, thanks to the high level of data encryption, in many cases using a mobile payment platform is even safer than using a physical credit or debit card.
In the event that the consumer’s mobile device is lost or stolen, there are many safeguards in place to keep card information out of the hands of thieves. As more companies and retailers adopt mobile payment technology, consumers will be essentially able to manage all of their business affairs from their phone - from making payments to splitting the check at dinner.
Benefits for Corporations
Consumers are not the only ones who benefit from mobile payment platforms. Corporations also have reason to adopt these methods. Supporting mobile payments is an easy way to attract more customers and in turn, increase revenue.
Walmart is one corporation that believes mobile payments are definitely the way forward. They have publicly discussed their views on high credit card processing fees and believe encouraging the use of mobile payments among consumers would drastically reduce the amount of fees retailers pay. The chain is moving toward more digital solutions, including shopping with the weekly fliers digitally, digital receipts, and digital purchase tracking that streamlines product returns and warranty claims.
Retailers are aware that enabling mobile payments is a good way to boost sales and increase customer loyalty. These loyalty benefits are thought to inspire more frequent visits to the retailers and can be seen in the success of apps from companies such as Starbucks and Subway. Both of these companies have noted increases in store visits thanks to digital integration and payment options available right on their respective apps.
Barriers to Mobile Payment Adoption
While many consumers have adopted mobile payment platforms without question, there are many more who have failed to get on the mobile payment bandwagon. Once a person has reached the register to pay for their items via a mobile platform, the confirmation process is often cumbersome and lengthy, especially considering the main benefit is intended to be convenience.
For instance, when a user is attempting to use Apple Pay, they must unlock the device with their fingerprint or passcode, choose the preferred card, and then place their phone near a payment terminal. They are then asked to confirm the amount, submit a signature, or enter their debit card PIN. After following all of these steps, the consumer may feel that this is no easier than using the physical card, and that’s an understandable reaction.
Some consumers have been slow to adopt mobile payment platforms due to the lack of intuitive integration. Consumers prefer that their smartphones keep track of all of their shopping-related activities, including loyalty cards, coupons, and special offers. If these items were automatically applied at the register, the process would be infinitely easier.
Mobile platforms continue to rise in popularity. Yet critics caution consumers, who are often more than willing to use these platforms in their day-to-day transactions, against blindly using mobile platforms. According to research, problems with money management are a key indicator of those most likely to use these platforms.
The high level of convenience can lead these consumers to impulse spend and incur more debt, since their money is accessible with the tap of a button. It will be up to consumers to educate themselves and use mobile payments in a responsible way.
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