Mobile payments in 2016

A recent industry conference revealed some interesting facts about what to expect from mobile payment applications in 2016.

The Money2020 conference, held recently in Las Vegas, gathered people from all across the finance and technology industries to discuss, among other things, the impact that mobile payment software will have.

Though the technology for customers to make purchases with their cell phones has existed for some time, it wasn't until Apple launched its mobile payment software, Apple Pay, late in 2014 that the average consumer started to take notice. Now, just a little over a year later, Apple has two competitors in Google's Android Pay and Samsung's Samsung Pay, and indications that other companies are going to get into this growing product category.

With all this excitement from the business side, it raises the question: are consumers actually using the new software?

While a recent Accenture survey reported that 52 percent of North Americans have knowledge of these applications, just 18 percent of them use the products regularly. Those that do skew young and affluent, as 23 percent are Millennials and 38 percent belong to higher-income households.

Despite the low numbers, few in the industry are deterred from expanding into this category. An eMarketer forecast predicts that mobile payments transactions will jump 210 percent next year, from a $8.71 billion to $27.05 billion.

Interestingly enough, 451 Research's senior analysts Jordan McKee pits the estimated growth of mobile payments on another new payment technology: EMV. "One of the biggest drivers is the EMV liability shift, which is helping to seed the market with contactless point-of-sale terminals. The infrastructure is beginning to fall into place."

EMV, or embedded chip cards, are quickly making their way into the pockets of American consumers. With the new cards, customers insert the chip-end of their credit card into the reader to make a payment rather slide the card's magnetic strip through (although the new cards will still be able to work this way if the point of sale hardware doesn't accept the new platform). Where the chips are encrypted, the information is more secure, in theory stopping big security breaches like those at Target and Home Depot in late 2013.

That's where the liability shift that McKee mentions comes into play. Prior to this past Oct. 1, if a retailer was hacked and leaked credit card information, the banks that issued the cards were held liable for the damages. Now, with EMV, if the retailers do not have the equipment to accept the new cards, they are the ones who will be held liable.

So, how does that affect mobile payment applications? The vast majority of the new hardware that accepts the new EMV cards is also equipped to accept payments through connected devices, like smartphones using mobile payment software. So, in upgrading their point of sale hardware to accept EMV, retailers are now able to accept mobile payments as well.

That's not to say that mobile payments are going to take off right away, there are still fragmentation issues and corporate dealings to work through, but it seems like everything is in place for them to make a big impact next year.

Many companies may only need new software to be able to accept this new technology. If your company is in need of a new credit card payment processor, be sure to shop with 911.

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