Where in the world are the mobile payment users?
By Oren Levy, CEO, Zooz
You don't need a crystal ball to predict that the use of mobile phones will escalate in the years to come. Statista has reported that there were 4.77 billion mobile phone owners worldwide in 2015. This number is expected to rise to 5.07 billion by 2019.
Cell phones provide a slew of vital services aside from their obvious use as mere telephones. Smartphones are used for texting, online browsing, email, social media, on-demand video downloads, job searches, payments and more.
Mobile phones and payments
The proliferation of mobile phones worldwide naturally extends to their use for payment purposes. Gartner has said that the global market for mobile payments will be worth $720 billion in transactions by 2017, up from about $235 billion in 2014.
All of these figures and projections have inspired mobile money providers to offer a growing range of payment services including international payments, ecommerce payments, and even salary payments.
Who's adopting mobile wallets?
Today's typical mobile phone user is inseparable from his or her cellphone. Like loyal pets, mobile devices follow their owners anywhere and everywhere; you will find them at work, at home, on the bus or metro, in-store, at the movies, etc. All of this makes them the ideal platform for payments of all sorts.
Nevertheless, while many fintech experts have been predicting widespread use of mobile wallets for assorted payments, adoption of the technology has been sluggish in many Western countries.
There are more than 200 mobile wallet systems in the world, but many of them are to be found in Asia, Africa and the Middle East.
Main western providers
There is no lack of mobile wallet providers in the West: Payment industry veteran PayPal is accepted on thousands of mobile sites and apps, enabling users to pay from any location without sharing personal financial data.
Apple Pay is a tap-and-go service that allows iOS users to perform payments with NFC-enabled credit card terminals.
Samsung Pay enables payment not only at NFC tap-and-pay devices but also at traditional magnetic stripe terminals. With Google's Android Pay, users load their debit or credit cards into the Android Pay app only once, and subsequently pay using a smartphone in the store.
Retailers such as Starbucks and Wal-Mart have successfully launched closed-loop mobile payment apps that make it easy to reward loyal customers for purchases.
The use of mobile phones for payments in emerging countries is booming. Following is an examination of different mobile payment methods in various developing countries and the reasons for their popularity:
There are several popular mobile payment methods in China, including AliPay, WePay by TenCent, and WeChat. One of the main growth drivers in the Chinese mobile wallet market is the country's rapid upsurge in Internet penetration, driven by the growing adoption of smartphones.
The Chinese generally distrust unfamiliar foreign payment providers, so newcomers to the Chinese market — including Apple Pay and Samsung Pay — will have their work cut out for them.
The average Chinese lacks trust regarding banks and money-handling in general, and their payment preference is COD, which allows them to check out a purchase before laying out money. Mobile payment wallets inspire a feeling of security among Chinese consumers.
The Russian Federation features several widespread mobile payment methods. The leading wallet is the QIWI Wallet, which is similar to a debit card and enables client self-service and payment via QIWI terminals.
WebMoney is an international settlement system that offers users an online platform for e-commerce.
Yandex.Money performs financial transactions in real time in Russian rubles, allowing payments and money transfers online.
A recent analysis of Russian e-commerce consumers indicates that more than 50 percent are unwilling to carry out transactions online. There is also a deep-seated lack of trust in banking institutions due to unfavorable past experiences.
Here, too, local mobile wallets can provide a sense of security.
The largest and most widespread mobile payment service in Africa is M-Pesa, a mobile phone-based money transfer, financing and microfinancing service.
M-Pesa allows users to deposit, withdraw, transfer money and pay for goods and services right from their mobile phone. Other rising solutions are Airtel Money and MTN Money, which provide money transfer and online payments.
Few Africans have bank accounts or credit cards. Mobile money originally targeted rural customers by enabling small personal payments, or cash withdrawals from kiosks.
Today, mobile payment methods provide access to the formal financial system for millions of Africans, while bypassing the traditional banking system.
India boast mobile payment services such as Paytm, ikaz, Mobi Kwik, Oxigen and several others. The reason for the proliferation of providers is that, while desktop PCs and laptops were the first web-enabled devices in Western countries, in India nearly 60 percent of users accessed the internet for the first time on a mobile phone.
Indian consumers are keen to conduct payments via their mobile phones. However, due to the fact that 2G bandwidth still prevails there, connectivity is often poor. So, while there are at least 13 million retail establishments spread out all over the country, there is little incentive for merchants to acquire costly POS terminals.
It all comes down to need
The difference between mobile payment use in developed and emerging countries is the actual need for additional payment modes.
Western countries, with their variety of payment options — cash, debit, open- and closed-loop credit and prepaid — will begin to use mobile payment only when it offers significant advantage over existing methods.
But in developing countries where either banking infrastructure or trust in the government and banks is lacking, mobile payments offer a secure and immediate payment channel that will undoubtedly continue to diversify and prosper.