eMarketer Live Q&A: Global Mobile Payments

You had questions, we have answers.

Thanks for sending in your questions regarding our Global Mobile Payments report collection and discussion. Here, eMarketer analysts and researchers answer the questions we received from clients.

Q: What are the biggest mobile payment companies in the world right now?

A: The biggest international mobile payment providers today are Apple Pay, Google Pay and Samsung Pay. But China has its own players, the biggest of which are Alibaba-owned Alipay and Tencent-owned WeChat Pay. Due to China’s large population and vast number of mobile payment users, both Alipay and WeChat Pay have user bases that rival or surpass those of the international “big three.” eMarketer does not yet produce worldwide forecasts for the number of users of specific mobile payment platforms.

There are also a handful of other regional or local mobile payment providers with large user bases in their home countries, including MobilePay in Denmark and Swish in Sweden. Mercado Pago, which is owned by Argentina-based ecommerce platform MercadoLibre, has made headway in parts of Latin America. India has a robust mobile payment landscape led by Alibaba-backed Paytm.

Our “Global Mobile Payments” report collection provides additional context on the leading payment methods globally and in seven markets: Canada, China, France, Germany, Latin America, the UK and the US.

Q: What are the trends around global mobile payments? What is the biggest disruption on this?

A: Mobile payment trends vary significantly from country to country, but the one thing every market we track has in common is that usage is growing. Next year, we expect 1.06 billion people worldwide to use a mobile device to pay for an in-store purchase at least once every six months.

One of the biggest disruptors in the global mobile payment landscape in 2020 will be social networks, whether through enabling peer-to-peer (P2P) payments or by developing digital wallets or currencies, like Facebook’s Calibra and Libra. Integration with other retailer initiatives, including loyalty programs, and gamification of services will also be something to watch next year. Finally, some mobile payment providers are expanding their financial services footprint through new products like credit cards, such as Apple’s Apple Card, launched in August 2019. This may affect the mobile payment market, as well as the banking sector more generally.

Q: What will be the impact on the banking sector?

A: We don’t expect that proximity mobile payments on their own will have a huge impact on the banking sector. In advanced economies, they are mostly connected with credit cards or bank accounts on the back end.

The story is a little different in China and other countries with less-developed banking systems. There, mobile payment providers, like WeChat or Alibaba, offer some credit services that are still fairly difficult to get elsewhere.

The bigger impact on the banking system in the US and European countries will come from P2P platforms. We expect that real-time payment services that give equal opportunities to all financial companies, such as the Federal Reserve Bank’s FedNow service, may really benefit P2P platforms, and may let them compete with banks more directly. Real-time payment services will also give fintech companies a more level playing field with traditional banks, which should create more competition. But all these effects are still a few years away.

Q: What are the latest trends for NGOs and nonprofits regarding mobile payments used for donations? How can global nonprofits improve donor experiences (e.g. reduce the amount of steps) with mobile payments?

A: P2P payment platforms are a secure and convenient way for nonprofits to accept donations. PayPal, for example, has a formal nonprofit program with incentives for participants, including discounted rates for registered charities, and allows for international fund transfers. Venmo’s nonprofit account program is currently in private beta in the US. Both platforms have a daily spending limit, but because the transactions are digital, donors can send the pledged sum later.

Setting up an account on a mobile payment platform can also improve the donor experience. Once a potential donor has a nonprofit’s account name or phone number, s/he can initiate donations through their smartphone. That provides a more seamless experience than exchanging cash or a check in person or using an online bank transfer that requires more information and additional steps.

Q: Can you speak to the challenges in the African market? Any insights into the future of mobile payments in Africa?

A: The challenges to mobile payment adoption in Africa are similar to those in other emerging markets. The region is home to a large unbanked population, which hinders adoption of the major international mobile payment services, as they require users to have a bank account. The lack of digital payment infrastructure is another hurdle, since retailers need to have upgraded point-of-sale (POS) systems to accept many types of mobile payments. On the consumer side, low smartphone usage has also held back mobile payment adoption. That means cash still tends to be the predominant payment method in the region.

But Africa is a large continent, and there are significant differences between countries. While we expect just 8.5% of the population in Sub-Saharan Africa to use a smartphone at least once per month in 2020, in South Africa, close to half of the population (47.7%) will. As smartphone user penetration rises, we expect mobile payments to become more common, though there is a long road ahead.

Some local payment providers have managed to overcome some of these challenges. Kenya-based M-Pesa is a great example. Launched in 2007, M-Pesa is a mobile money service that initially allowed users to transfer money via SMS. Today, it offers users even more financial services, like savings accounts and loans, as well as the ability to make in-store smartphone app payments via QR code. M-Pesa is available in multiple countries across the Middle East and Africa.

M-Pesa has also improved overall financial inclusion in Kenya. According to the Central Bank of Kenya, 83% of the population had access to formal financial services in 2019, up from just 14% in 2006. That increase was largely driven by mobile money services like M-Pesa.

International providers eyeing African markets should keep these unique characteristics in mind. In March 2019, for example, Samsung Pay launched in-store payments in South Africa. Unlike Apple Pay and Google Pay, which use only near field communication (NFC) technology, Samsung Pay also supports magnetic secure transmission (MST). MST emulates swiping a physical payment card by sending a magnetic signal from a mobile device to a payment terminal, meaning that retailers do not have to upgrade their POS systems to accept mobile payments.

Q: What can you tell us about other modes of mobile payments, like QR codes? Also, what is your take on indigenous products like the Unified Payments Interface (UPI) in India, which has taken over card payments in the country? How do you see these other modes of payments compared to proximity?

A: QR codes definitely make it easier to set up a proximity payment system. Most phones can read them, whereas phones with NFC chips are less common, especially in developing economies. That’s why Chinese payment platforms went with QR codes, and why they’re still dominant there. Elsewhere, however, you see NFC-based systems dominate, except in payment options embedded in retailer or QSR apps, such as the Starbucks app or Walmart Pay.

We expect NFC payment systems to gain adoption in China as NFC-enabled phones spread. In fact, Vivo was the latest of the Chinese smartphone manufacturers to offer NFC support in its mobile wallet

Regarding UPI, it has effectively served as an easy replacement for cash in India. By letting financial institutions and fintech companies make transactions in real-time, it effectively turned the phone into a replacement for cash. This was especially important as the Indian government banned cash for some time in an (unsuccessful) attempt to stamp out corruption.

The lesson for other companies is really around the importance of a system that enables real-time payments between a wide range of financial companies.

Q: What mobile payment options are right for very small businsesses who can't afford a high-end point-of-sale (POS)?

A: In the US, most new POS systems, even low-cost ones, have NFC readers. That said, Square and other mobile POS systems can provide affordable card readers for small businesses. For very small businesses, independent contractors, and for businesses globally, P2P platforms often play an important role in accepting payments. In China, for instance, platforms like WeChat Pay and Alipay double as P2P and proximity payment platforms.

Q: Should companies move to a mobile-only experience?

A: For US and European companies, only a minority of users in these countries use proximity mobile payments. In the US, for instance, you’d miss two-thirds of the population if you go mobile only. In China, and to a lesser extent, India, small businesses may be able to get by with a mobile-only approach, but that’s because a large majority of smartphone users there use proximity payment platforms. In the rest of the world, it’s just impractical at the moment.

Q: Beyond promotion/discount, what are the factors to shift users from offline payment to digital payment (e-wallet)? Are these factors different across regions and users’ background (economy status)?

Related Q: How do we get a traditional store owner to use mobile payment platforms when he doesn’t trust mobile payments and he lives in a village where going to the bank is a long and arduous journey?

In general, promotion or discounts have played a really big role in encouraging users to shift to digital wallets. Apple and Walmart, for instance, are using credit that can link to their proximity payments, which give extra discounts when a payment occurs via the mobile wallet.

Beyond discounts, however, some platforms have tried gamifying mobile payments by linking them to loyalty accounts. Starbucks is a really good example, but it’s not unique. Basically, every time you make a payment, you see how it influences your rewards, and you can even get double-rewards some days.

There are other ways to encourage the use of cards once you go outside the US. In countries where secure financial instruments (like credit cards) or even cash are harder to come by, proximity mobile payments could offer solutions. In those situations, there could be ways to incentivize retailers or merchants to accept mobile payments (which probably would work globally regardless of an economy’s development level). The larger the base of merchants that accept mobile payments, the more likely people will use them.

Q: Do you have data on mobile payment users in other Asian countries like Japan, Singapore, Hong Kong and Thailand?

A: We do have a forecast for Proximity Mobile Payment Users in Japan. See the charts below for third-party data we have on mobile payment users in other Asian countries.

Q: What's the most effective method to accelerate mobile payments in countries like Taiwan?

A: National initiatives by the government and development by retailers/payment providers are the major factors growing mobile payment adoption in Taiwan.

The government is helping to promote mobile payments through a rewards program for small merchants and consumers. For one, it will provide tax incentives to reduce barriers for small-scale merchants to adopt mobile payment—paying just 1% in business tax until the end of 2020, even if their revenue grows. And consumers are also receptive to incentives by the government-subsidized programs involving Taiwan Pay, Line Pay, JKoPay and others, and mobile wallet app Pi. See more details about the program from National Development Council, Focus Taiwan and Taipei Times.

The government is aiming for a mobile payment penetration rate of 90% by 2025 (Focus Taiwan).

On the consumer end, according to Market Intelligence a,nd Consulting Institute, consumers used mobile payments mostly at convenience stores (62.3%), followed by hypermarkets (37.7%), supermarkets (32.3%), department stores and shopping malls (30.2%) and restaurants (29.7%) in 2018 (Taipei Times).

EasyCard is a popular smart card that can be used across all public transports in Taiwan. Service was expanded to include convenience stores, department stores, supermarkets, taxis and other retailers a few years ago. EasyCard is often used to pay for daily expenses. Consumers can now download an EasyCard standalone app or load into Samsung Pay (NFC Times).

Retailers/merchants are using POS terminals that accept contactless or QR code mobile payments. Major convenience stores started accepting mobile wallets from Apple Pay, Google Pay, JKoPay and LinePay. 7-Eleven in Taiwan accepts mobile payments using a mobile wallet provided by Pi Mobile Technology backed by a bank card supplied by CTBC Bank in 2015 (Taipei Times).

Taiwan Pay is one of the leading mobile payment services using QR code technology via smartphones launched by local banks and initiated by the government. Last year Taiwan FamilyMart and OK Mart joined to support adoption for Taiwan Pay (Taipei Times).

Q: How is the mobile payment market is changing in Europe?

A: Proximity mobile payment adoption in Europe differs by market. For example, in 2019, Switzerland’s adoption is high (with 22.3% of smartphone users using proximity mobile payments), followed by Italy (21.1%), the Netherlands (19.7%) and the UK (19.1%). Meanwhile, Spain (16.5%) and France (15.6%) have a low adoption. In Germany, adoption is even lower, with 12.5% of smartphone users using proximity mobile payments. We have forecasts for several European countries, which you can access by following this link and filtering the search on left by country.

Since Europe is a very broad market, here are a few country highlights:

· One reason for slower adoption in France, Germany and the UK is the increasing popularity of contactless cards, which are competing with proximity mobile payments.

· Cash is also still a very popular and often preferred payment method in some European markets.

· Security concerns are still an issue for the more privacy-conscious nations such as France and Germany.

· In France, Germany and the UK, public transportation could present an opportunity for proximity mobile payments growth.

· The top services differ by country, but besides global players (such as Google Pay, Apple Pay and Samsung Pay), PayPal has also gained traction within mobile payments.

Q: In Northern Europe, we see a lot of issues on global mobile payment user experience (UX). What can be done to influence providers to improve this and provide accurate data on how this impacts conversion?

A: While we currently do not have any charts related to mobile payment UX, we do have research on barriers and opportunities for mobile payments. Please take a look at the article Contactless Competition and Digital Limitations Stifle Proximity Mobile Payment Growth in the UK.

We have additional charts on the in-store retail experience which may be of use. Please see the charts below on consumer attitudes toward mobile payments, how mobile payments can improve their shopping experiences and even if this can influence their purchase behaviors. There is also data from the retailers’ perspectives.

Q: Which mobile payment technologies will grow most in 2020 in Mexico and other LatAm countries?

A: From what we’ve seen so far, QR code payment technologies will grow most in Mexico and other Latin America countries. QR codes are much more prevalent in emerging markets where NFC-enabled smartphones are less common. Their ease of use, low cost and ability for merchants to receive instant payment has enabled much greater adoption. Argentina’s MercadoLibre will also have an important role in driving QR code adoption—on both the merchant and consumer side.

In Mexico specifically, NFC payments could see some additional growth. According to the Competitive Intelligence Unit, Samsung controlled more than one-third of Mexico's smartphone market at the end of Q2 2019. According to Ogury, Samsung's mobile payment app had the highest market share in Mexico in July 2019, at 6.8%, compared with PayPal (1.9%), Mercado Pago (1.7%) and Walmart's Cashi (0.1%). Despite this, Mercado Pago had the greatest number of active users, at 46.1%, as well as the highest amount of app sessions per user (12.4 sessions) out of the four mobile payment apps analyzed by Ogury.

Q: In general, a low iOS adoption is seen in LatAm regions where mobile payments are comparatively new. When compared to Android, iOS users are considered to generate more revenue for brands. Any suggestions how mobile payment players in LatAm should cover this?

A: Correct. iOS adoption in Latin America is low given the high price-point of an iPhone in several Latin American countries.

Given the high levels of unbanked rates across the region, coupled with a higher influx of cheaper smartphones, mobile payment players will likely turn their attention towards QR codes. We’ve seen this from big players like MercadoLibre with Mercado Pago as well as Walmart in Mexico, with its mobile payment app Cashi.

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