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Friday, March 01, 2019

Why Mobile Payments and Fintech Disrupt eCommerce

Fintech innovation continues to disrupt the Global Networked Economy. The value of consumer spending on remote payments for digital and physical goods is estimated to have surpassed $3.3 trillion in 2018 -- that's up 10 percent on the 2017 total of $3 trillion.

A recent worldwide market study by Juniper Research found PayPal already accounts for 20 percent of all transactions made outside China, while the success of Alipay and Weixin Pay within China means that these two players combined now account for 45 percent of global payment volumes.

Mobile Payments Market Development

Mobile payments impact on eCommerce’s growth cannot be overestimated. The emergence of an app-based economy in the wake of Apple’s App Store launch in 2008 made many online retailers -- such as Amazon, eBay and Alibaba -- recognize the channel’s potential.

When digital and physical goods are taken together, mobile devices (including media tablets) are expected to account for nearly 51 percent of online transactions by value in 2018, a figure that rises to 68 percent in China.

The window of opportunity in the U.S. market for mobile payment providers like Apple Pay and Google Pay is closing fast. Despite high levels of support from retailers, only 14 percent of U.S. respondents currently use OEM-Pay (payment services provided by smartphone vendors) for in-store purchases.

Future growth is likely to be threatened by increasing deployments of contactless cards in the U.S. market, with Chase becoming the latest major bank to announce contactless Visa rollouts.

“Time is running out for OEM-Pay providers to establish a dominant position in the US,” said James Moar, senior analyst at Juniper Research. “Many of mobile payment’s benefits, like increased transaction speed, are not exclusive to smartphones, and our survey shows that the majority of users who have not adopted OEM-Pay are more interested in services like contactless cards than mobile-based payments.”

Juniper’s survey findings also confirm that online shopping is having a detrimental effect on physical retailers. Forty percent of survey respondents in both the U.S. and the UK report that they shop less in stores due to using online and mobile commerce.

In addition, the trend of ‘showrooming’, looking at physical goods in stores and then checking prices online was reported by 24 percent of UK survey respondents and 13 percent of U.S. respondents.

Outlook for Mobile Fintech Innovation 

However, while mCommerce is a zero-sum game in the UK, with few users increasing overall retail spending, it may open up new retail opportunities in the U.S. market. Thirty percent of respondents report shopping more overall due to their use of mCommerce, not merely shopping more online.

Additionally, the survey shows that continued reliance on browser-based online purchasing is perpetuating non-biometric authentication methods, like passwords or PINs, presenting an ongoing security problem. Regardless, the future of mobile fintech innovation looks promising.