March 10, 2015

The Next Big Thing

Ash Seth – Analyst, MergerTech


If you live in a tech friendly city like San Francisco or Austin, odds are you’ve used a mobile payments device like Square or Intuit Gopayment at least once to purchase a frozen yoghurt or pay for a haircut.  If so, you probably thought, ‘that was cool,’ and then didn’t give it another thought.


The concept of mobile payments seems a lot more glamorous when one considers that according to the Census Bureau, American consumers spent over $2.4 trillion on their credit cards last year.  That is by far the largest accessible market in America that can be disrupted, and mobile oriented technology companies are in an all-out land grab for a piece.


It is fair to point out that for years a joke has gone around certain circles in Silicon Valley: “Mobile payments are the next big thing, and always will be.”  Traditionally, consumer anxiety over using mobile devices to handle sensitive financial transactions has traditionally been the biggest stumbling block to more widespread adoption.  Additionally, mCommerce growth involves a change in user behavior, and requires some collaboration between banks, mobile carriers, card networks and merchants.


Though none of this has stopped mobile payments from becoming a $600M industry, predicted to be worth more than $50B in just four years by Gartner, KPMG, and Forrester alike.  That’s just for starters.


ODMs like Samsung and HTC are under significant pressure to deliver new, game changing features on their smart devices in order to compete—and mobile payment features are front and center.  HTC has already developed partnerships with Chinese bank card networks like China UnionPay to turn their smartphones into digital wallets for use in designated department stores, restaurants, supermarkets and cinemas.  The forever busy Apple gossip mill is agog with rumors the iPhone 5s will include fingerprint recognition technology (which Apple acquired when it bought AuthenTec last year)—supposedly as a cornerstone of a mobile payments service.


Ultimately consumers and vendors need to be convinced that mCommerce is a better alternative to traditional payment methods.   Yet the scale for greater convenience, security, better UI/UX, and lower merchant fees present clear advantages and opportunities for a mass migration towards mobile payments.  Keep an eye out for a buying spree on mobile enabled technology by ODMs, telecoms, financial services firms, and large retailers.