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Digital payments gain ground as HCE hints at FI involvement

HCE technology has the potential to advance mobile transactions powered by tethered credit or debit card accounts, says Juniper Research and other industry observers.

September 8, 2014 by Dan Kramer — Senior Vice President, Marketing & Merchant Servic, SHAZAM

Consumers are increasingly trading their PCs for mobile devices to shop online. According to the report from Juniper Research, "Digital Payment Strategies: Online, Mobile & Contactless 2014-2019," mobile payments will become more widely used, and will be key to driving sales in-store and online over the next five years.

Juniper predicts an 88 percent increase in contactless payments in general, with a total of nearly $5 trillion by 2019. That’s up from $2.5 trillion expected this year.

However, credit card purchases are forecast to remain on top even as mobile payments become more prevalent. Much of this may be due to the anticipated popularity of host card emulation-based near field communication services.

This technology, according to Juniper and several other industry observers, has the potential to advance mobile transactions powered by tethered credit or debit card accounts.

“While we are now seeing contactless transactions scaling up in markets such as Australia, Poland and the U.K., almost all current consumer usage is via the card,” the report's author, Dr. Windsor Holden, said in a press release. “However, with banks increasingly attracted to an NFC model in which they have full control of the customer, we may well see some high-profile deployments in the medium term.”

HCE not only lets consumers tie their favorite card accounts to their mobile payments app, but it also allows them to continue working with their trusted financial institution, since the HCE app is likely to come from an FI.

Not surprisingly, research indicates that consumers spend more confidently, freely, and in larger amounts, when they fully trust their mobile commerce applications.

Specifically, a recent Future Foundation report found that 57 percent of consumers would feel more confident buying goods and services via their mobile devices if they could use apps provided by their FI.

In light of this, FIs supporting their own mobile payments platforms (HCE-powered or otherwise) could be the key to this projected digital payments growth.

photo courtesy of jason tester | flickr

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