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Proximity Mobile Payments Set to Explode in US

Consumers expected to pull out their phones to pay more and more

Proximity mobile payments are not yet very popular in the US—eMarketer estimates that such point-of-sale payments using a mobile phone as a payment device, whether via near-field communications or other contactless technology, will total just $640 million this year. But that’s an increase of 283% over last year’s even smaller base, and a number that will rise a further 234% by the end of next year.

By 2016, proximity mobile payments will have exploded in the US, and total transaction value will hit $62.24 billion.

These estimates are based on the following key assumptions:

  • In the near term, light users experimenting with low-dollar purchases will dominate the mobile payment audience; a smaller segment of heavy users who habitually buy their daily coffee, for example, with a mobile payment system will increase over the forecast period.
  • The significant jump in total and per-user spending over the forecast period will be driven by consumers adopting mobile payments for medium-priced purchases such as groceries, gas and fast-casual dining. eMarketer views this type of habitual consumption as crucial for moving mobile payments into the mainstream.
  • The increased activity among these regular users is contingent on a number of factors, including the assumption that more mainstream merchants will accept mobile payments of some kind; the experience of using a mobile payment platform will be sufficiently convenient and add enough value to encourage repeat use; and concerns about security and smartphone battery life will gradually ebb as consumers grow more familiar with the different systems available. Absent these conditions, the market may not develop as predicted in the model.
  • By the same token, in the event that hardware and infrastructure impediments are resolved in a shorter timeframe, and clear “winners” emerge in the mobile payments ecosystem—factors that may help drive adoption on both the merchant and consumer side—the proximity payments opportunity could be significantly greater.

Although the US market holds significant promise in terms of the sheer volume of mobile payment transactions, it is likewise characterized by fragmentation. eMarketer believes the number and scope of the different mobile payment solutions currently available or preparing for launch in the next six to 12 months will have contradictory effects on the market. On the one hand, more solutions, and the media attention they bring to the mobile payments segment in general, will raise awareness for consumers and merchants. On the other, the sheer number of choices will present a challenge for both groups, but for merchants in particular, who may incur significant costs in choosing one solution over another, especially in cases where a solution entails new point-of-sale hardware.

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Check out today’s other articles, “Tablet Ads Deliver Results, but Barriers Remain” and “UK Still Prefers Traditional Customer Service Channels.”

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