Mobile Payments: The New Cash and Small Business Customers

Small businesses must adapt to the mobile transaction shift quickly to maintain customer loyalty, market share and revenues.

 

Mobile payments will make cash obsolete and improve the productivity of the payments process.

While the use of mobile payments is still relatively small in most countries, it is growing rapidly and is highly favored by millennials. Small business owners and IT executives must develop and execute a strategy for smartphones and other mobile devices to be the prime user channel for access, distribution and payments.

Mobile payments– or as some like to call it “mobile money” – is gaining adherents quite rapidly worldwide.

The growth in Latin America, Africa, Asia, and even Europe is in the mid-double-digits with more than 120 million active mobile money users globally. Individuals are using their mobile devices to buy new products and services, pay bills, and send funds to other people in real-time. Users find they can send money cross border from one mobile device to another at the speed and ease of sending an instant message.

While the payments component is still relatively small compared to the other channels, the inquiry and viewing of pushed content is approaching universality.

Trends

The current market share of mobile payments cannot be accurately estimated since non-banking players do not have to report their payment transactions although they handle a fair share of it. Nonetheless it is projected to be in the six to 11 percent range of all non-cash transactions. However, we can examine the impact to the banking environment.

 

According to a 2016 survey of U.S. banking activity, we find the following to be true:

In addition, each of these categories is seeing double-digit growth year-over-year. In Brazil, for example, just shy of 50 percent of banking customers access their accounts via their mobile devices at least weekly. In the U.S. the number drops slightly to 43.4 percent.

Moreover, 48 percent of respondents stated they prefer to pay using their phones vs. credit card or cash.

Not only do the banks recognize mobile payments are the wave of the future, non-banks such as Google (Android Pay), Apple (Apple pay), Cheesecake Factory (CakePay), MasterCard (masterpass), PayPal, Safaricom (M-Pesa), Samsung (Samsung Pay), Square, and Walmart (Walmart pay) have leapt into the market.

Requirements

To play in this market a company has to be able to offer a 24×7 payment system with real-time (or near real-time) funds availability as an opener.

Other table stakes are:

  • Easy addressing of payments via mobile number or email account as well as by bank account number
  • Confirmation of the transaction within seconds (and if it is person-to-person, the confirmation is expected to delivered to both parties)
  • Instantaneous transfer – i.e., the funds are actually transferred immediately. It is not a bookkeeping entry that has the transfer occur one to three days later.
  • Irrevocability – once parties are notified it has occurred, there is no backing it out

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