The key challenges facing the US mobile payments market this year

One of the biggest buzzwords in the payments sector right now is mobile. Whether it’s the development of a wide range of new mobile wallet technologies or using a smartphone to directly make an in-store payment, it’s forecast that this will be the face of many everyday payments sooner rather than later.

But will mobile’s path to widespread acceptance really be that smooth? Although the number of payments made via smartphone around the world has rocketed in recent years, there are still a few key hurdles that need to be overcome before it can reach full maturity, particularly in key markets such as the US.

Some of the challenges for the region were recently highlighted by the Federal Reserve Bank of Atlanta, in a feature outlining the organization’s predictions for the payments industry in 2016. While mobile is a wide-ranging area, it highlighted a few key sub-sectors that are set to be particularly prominent in the US this year.

POS still lacking maturity

Among its forecasts, it disagrees with claims that mobile payments at the point-of-sale will become mainstream in 2016. The Fed noted that similar claims for the technology, which allows users to make in-store payments directly from their device, have been made for each of the past few years, but have yet to come to fruition.

While some progress will be made towards this in 2016 – primarily down to increased adoption of the technology among Millennial consumers – there’s still a long way to go. In particular, issues that still need to be addressed include the fragmentation of the market, a limited number of merchants accepting the technology, and consumer concerns over the security of the solutions.

In order to overcome the latter worry, it will likely take a major education effort by providers of mobile payment solutions to convince consumers of the security of the tools. This will need to involve emphasizing roles of tokenization and biometrics, such as the fingerprint scanner used by Apple Pay, to verify transactions.

Mobile wallets to see fierce competition

However, the Federal Reserve Bank of Atlanta also forecast that the mobile wallet space is set for a period of significant turbulence and disruption this year, as various players in the sector seek to build market share.

In the past couple of years, there have been a wide range of new entrants looking to claim a piece of the pie. Technology firms like Samsung and Google, financial institutions including JPMorgan Chase and Capital One, and even retailers like Target have all been developing their own solutions. At Money2020 Europe it was clear more are entering the market with Asian players looking to expand into Europe and the US.

The result of this is a highly fragmented market that may well need to consolidate in order to see long-term success. Already, there are questions as to how many of these mobile wallet apps consumers will be prepared to install on their phone, and which providers they will trust enough to give their financial details to.

Given these questions, the piece stated: “We believe we’ll see continued turbulence in this space during 2016, with some settling of the dust by next year.”

It’s clear that the US mobile payments market is still working towards maturity, and until the industry can settle on some key standardizations – and consumers have their say on which solutions they will and won’t accept – we can expect a bumpy road ahead before it takes its place as a mainstream payment option.

Written by Andy Brown

Andy Brown

Andy is marketing director for payments at NCR. He has nearly 30 years' experience in e-payment systems from the delivery and support of systems in the Far East and Europe, from both the product management and marketing perspectives. Based in the UK, Andy is responsible for marketing NCR payment solutions.

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