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Why banks need to be in the mobile wallet business

February 6, 2014 by Dan Kramer — Senior Vice President, Marketing & Merchant Servic, SHAZAM

A recent Allied Market Research report indicates the global mobile wallet market is on target to reach $5.25 trillion in 2020, with a compound annual growth rate of 127 percent over the next seven years alone.

According to the report, an increased awareness of the usefulness of the mobile wallet and its various applications, along with increasing numbers of wallet-capable mobile devices, as well as improvements in security, are all driving this significant growth rate. The report described some key points about the mobile wallet market worldwide; including projecting mobile commerce to be the leading segment until 2020, followed by mobile ticketing and mobile money transfer.

Expected to see the fastest growth is the Asia-Pacific region, followed by Europe, the Middle East and Africa. EMEA growth will be at least somewhat driven by population growth in African countries, where there's very little in terms of regulation and monitoring for mobile payments.

Asia-Pacific countries are experiencing a bit more consumer reluctance to accept the mobile wallet system, which has hampered growth in the past. However, demand and improved systems may work together to get Asia-Pacific in the game at a higher rate.

The report found that many consumers still prefer cash or credit card payments. This is due mostly to their familiarity and perceived safety. Mobile wallet technology is still new and hasn't had time to build the reputation that other payment methods have.

However, with a great deal of capital involved in the companies dealing with mobile wallets, there’s a lot at stake. These companies will most likely work hard to address misconceptions, improve security, and make the mobile wallet experience as painless and familiar as cash and credit card transactions are today.

It’s important to remember that financial institutions can stand out in front of these companies due to their current trusted relationship with customers. FIs can lead the way if they make an effort to educate consumers on the merits, convenience, and security of the mobile wallet, as well as point out the increased benefits of using a mobile wallet provided and backed by their FI.

Read more about mobile banking.

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