By Noel Moran
In this digital day and age, it seems we’re obsessed with mobile phones, the latest technology and staying connected. The days when our phones were used for just calls and texts seem little more than a quaint memory. The expansion of mobile means we now use our phones in every aspect of our lives; even our payments.
In the tech and payments world, mobile payments have been the subject of much speculation of late. Many sceptics remain adamant in their opinion that new mobile functionalities won’t take over from traditional banking methods. This belief is based on the longevity argument; the smartphone emerged over five years ago, and has some way to go before dominating the mainstream payments market. In addition, many say, additional consumer fears around security will put paid to significant growth.
These observations ignore that in the last six months alone, the industry has overcome many of the initial structural challenges pointed out by pundits. The new sector is now beginning to see steady growth. Experts now predict that by 2015, there could be up to $1 trillion in mobile payments, and 1,050 million users of mobile payment technology worldwide.i
Despite naysayers, an increasing trend towards mobile payments echoes the rise of all things mobile in 2013, and the increasing need from consumers for convenient, instantaneous solutions, driven by technology. This – a world where people expect results at the click of a button – is the major appeal of mobile payments, and the factor which will drive its expansion.
Another key driver is the rise and rise of emerging markets such as Africa, where mobile is a near-universal channel of communication. In many of these countries, many people now have access to basic banking services through their smartphones, and we’re witnessing a trend towards non-cash payments. A recent report by the Payments Council found that the number of cash payments will fall from 21 billion in 2012 to around 14 billion in 2022, as consumers increasingly switch to cash-alternatives in their money transfers.ii
In line with this expected increase in mobile payments, we expect to witness a similar growth in the popularity of prepaid cards. The prepaid market in the UK and Ireland alone is predicted to be worth €92bn by 2017. Given a strong base in the US already, and an imminent expansion in Europe, we can expect prepaid to be a more dominant form of payment in the coming years – one that may even pose a threat to m-payments.
At Prepaid Financial Services, we expect to grow our prepaid and m-payment services next year, reflecting the wider growth throughout the market. Our priority for 2014 will be to expand into new markets outside Europe, particularly in areas where we’ve made initial inroads, but where the potential for growth is huge, such as Africa.
As the industry develops, contactless payments are set to rise even further, and new and old players alike will be mindful to stay on top of this trend. For example, we’ll be increasing our issuance of contactless and virtual cards, upgrading our mobile app to enable users to make and receive card payments, and launching a multi-currency card in 2014.
Despite rapid changes in the sector, the road towards global mobile payments is by no means simple. There still lie a number of challenges for providers and merchants to overcome on the way. One thing is certain, however; consumers have bought in to the idea of mobile payments, and the demand is there. If the industry can clear the remaining hurdles, then the potential for growth will be enormous.
Noel Moran is the founder and CEO of Prepaid Financial Services (PFS), an innovative technology and payments specialist offering real-time flexibility on a range of prepaid, remittance, payroll, acquiring and e-mobile solutions to corporations, consumers and local governments around the world.