We cannot deny that the advanced technology of smartphones has changed our lives and this shift continues to evolve in a positive way. The smartphones and innovative payment technologies are giving us relief in every corner of our lives. In today’s world they are now irreplaceable. This technological advancement is reflected in banking services all around the world. We are going to explore the current state, challenges, emerging trends and future of mobile payments globally.
If you often start looking around for an ATM to pay cash during the day, we have good news for you: Apps that can make mobile payments and points that accept such payments are becoming more and more. It seems that very soon we will be able to go shopping comfortably without having to take our wallets with us from our home. In other words you don’t need to go around looking for an ATM, you can do all types of transactions from your mobile phone.
This revolutionary change has also had a big effect on e-commerce and online shopping. The rapidly growing e-commerce volume also provides an opportunity for the development of mobile payment systems. The opinion of experts is that mobile payment systems will almost completely rule business life in the coming years. In 2023 the global mobile payment market surged to $54 billion and continues to skyrocket growth for the upcoming years.
Safety comes first…
The biggest trump card of mobile payment systems is that they are secure. These systems, which are only made easier to use by using user-specific encryptions, do not have the capability of being copied or stolen and utilised by someone else. Although it may appear that mobile payment methods may take some time to distinguish themselves from today’s payment systems, which are dominated by credit cards, they do present an alternative to credit cards. They are also very personalised according to the needs of users.
Current State of Mobile Payments
Like we have mentioned before, mobile payments have experienced exponential growth over the past decade. When we look at the available data up to October 2023, the global market was valued around $1.3 trillion. Key players such as Apple Pay, Google Pay, Samsung Pay, and regional giants like Alipay and WeChat Pay in China have dominated the market, each offering unique features tailored to their users’ needs.
Regional adoption is very successful. For example in Asia, China and India have integrated mobile payments into daily life. They tend to use new methods such as QR codes. However in Western countries the situation is different. Western countries are adapting very slowly due to complex traditional banking infrastructure. Also consumer habits are different then east. Western consumers prefer more credit and debit cards.
Trends and Drivers
When we look at the landscape of mobile payments we can see several different factors.
Smartphones: Smartphones have evolved very fast since day one. Smartphone users are potential clients for mobile payment services. Especially nowadays with affordable smartphones this market has been extended in developing countries. As we know the traditional banking system is not working properly thus these countries are also big targeted markets for mobile payment services.
Cashless life: Cashless operations are beneficial for government and financial institutions as they are more traceable. Cashless operations have high transparency and are much more efficient economically. Primarily countries that have increased the cashless operations are Sweden and South Korea.
COVID-19: We all observed the global impact of the covid-19. Contactless payments have been adopted for hygienic reasons. This situation has triggered the advancement of these technologies.
Regulatory Support: Most of the countries have prepared necessary regulations around digital payments. The European Union’s Revised Payment Services Directive (PSD2) promotes competition and innovation in payment services, while India’s Unified Payments Interface (UPI) has revolutionised peer-to-peer transactions.
A very convenient method to grow in a short time
Commission rates in mobile payment systems are currently high. Because of the limited usage zones, this is the case. As the usage area and number of users grow, it is expected that this scenario would be remedied in the near future. Financial organisations claim that when alternative payment choices in mobile payment systems and competition-driven flexibility are in place, everyone will favour mobile payment.
Mobile Payment Technologies
Near Field Communication, or NFC for short is a short-range electromagnetic wave communication technique that serves as the foundation for mobile payment systems. This technology, which is found in all smart gadgets, may now also be found in SIM cards. This is also a hint that, in the digital age, mobile operators must now provide users with more applications and technologies than just voice and video communication. GSM operators are expected to engage in a vigorous battle in terms of mobile payment and application possibilities in the not-too-distant future.
Common mobile payment options are Apple Pay, Google Pay and Samsung Pay.
Another popular payment option is QR codes. Users can scan these QR codes with their mobile phone camera, and the app initiates the transaction.
What are the Emerging Technologies?
Blockchain and Cryptocurrencies: Right now the most secure transactions are realised through blockchain technology. Cryptocurrencies are much cheaper options for cross border transactions. In most countries central banks are also working on adoption of cryptocurrencies in their system with such projects Central Bank Digital Currencies (CBDCs).
Biometric Authentication: Today’s biometric technology is far from the 80s movies. Now we can do fingerprint scanning, facial recognition and even iris scanning. These are hundred percent secure authentication methods so we don’t just rely on PINs.
QR Codes: QR codes are low-cost alternatives and they are compatible with almost every device that has internet access. We can classify them as mobile payment methods.
5G Technology: 5G networks are available all around the world and support the user experience for faster and more smooth mobile transactions.
Artificial Intelligence (AI) and Machine Learning: AI and machine learning algorithms improve fraud detection and prevention, analysing transaction patterns to identify anomalies and potential security threats.
Challenges and Limitations
We have explained the positive aspects of mobile payments, however there are challenges and limitations:
Security Issues: Mobile payments are being used more and more and it makes them attractive for cybercriminals. All types of mobile payment methods require high security measures in order to provide the best services to customers.
Regulatory Problems: There are regulatory national levels however for crossborder transactions there are still complications. There is a lack of international regulation.
Interoperability Issues: There is no standardisation when it comes to mobile payment methods. There are lots of incompatibilities between these systems which limits them in certain points.
Digital World: In areas with limited internet access or low smartphone usage, there is no benefit of using mobile payments as they are inaccessible.
What future brings in?
Looking ahead, mobile payments are set to become increasingly important, even more integrated into the global financial system. Today we can see an increasing number of software engineers have started to work in financial institutions:
Financial Inclusion: Mobile payments can bridge the gap for the unbanked populations by providing access to financial services without traditional banking infrastructure which requires a very small investment compared to traditional banking infrastructure.
Central Bank Digital Currencies (CBDCs): CBDCs could reshape the monetary system by providing a digital equivalent of cash, backed by national governments. Countries like China are already piloting digital yuan initiatives.
Integration with Internet of Things (IoT): As IoT devices become more common, they will enable seamless transactions between devices, such as automated payments for utilities or transportation.
Change in the Traditional Banking Systems: All banks around the world are steadily adapting by developing their internal mobile payment solutions and partnering with fintech companies. Still there is a big gap between banking and technology firms however most physical banks have been adapting technological systems. They have started employing software engineers and developing their internal technologies.
Global Standardisation Projects: International entities have been working towards standardising regulations and technologies to facilitate cross-border mobile payments, in order to develop global commerce. The European Union and other countries have developed research projects.
App support
Banks have developed mobile payment apps that allow customers to conduct internet banking transactions. Except for mobile banking, several applications can make payments straight via smart devices. You may make cardless and cashless payments with mobile transactions in places like marketplaces and restaurants using these applications.
Customer experience
User experience is the key in the new world’s technological developments. The mobile payment methods undoubtedly brought a new perspective to customers. Most of them are designed to offer the best solutions. These payment methods are used both individually or at a business level. Individual use of mobile payment methods facilitates routine transactions and cross border payments. Today we can pay directly from our smartphones without needing to carry cash. This gives instant gratification and also saves time. Also we can schedule recurring payments such as phone or electricity bills. You only get a notification when your payment is done. Also mobile payment methods have much better rates when you exchange money.
If you are constantly sending money to your loved ones or family, you don’t need to fill in all the information again and again. You can mark the recipient as a trustee then you can instantly send your money without repeating all long processes.
At business level mobile payments enable clients’ lifecycle in ecommerce and boost marketing, sales and customer service. Due to mobile payment methods there is more engagement in customer experience. We can automate campaigns at global scale with accelerated payment solutions. Thus your sales team can focus on other tasks which can contribute to the ROI of the company or business. Adapting global mobile payment methods might open big doors for your business in terms of sales and customer satisfaction.
Another important aspect is customer data insights. With mobile payment methods, banks and financial institutions can obtain valuable data insight about customer behaviour and spending habits. This data can be useful when they are developing a new product or service. Especially when it comes to e-commerce with the fast mobile payment customers can experience hustle free shopping. And the most important part is security. Whether you prefer to use mobile payments at individual level or business level, The mobile payment methods provide the top-notch security through advanced authentication features. There are also buttons on websites which facilitate and accelerate the sales process. These buttons are directly connected to a mobile payment option. We recommend you to use these buttons if you are an ecommerce owner. Also if your business is a local one, you can grow your business globally with mobile payment options. Of course there are steps that need to be taken but mobile payment options are the foundation for businesses to open global markets.
The future is in our hands!
Technology advancements and the shortening of innovation cycles have a significant impact on the payment industry, as they do on all industries. Due to their substantial change, established payment mechanisms and infrastructures are undergoing significant changes. The future looks bright, with the technological advancements and increasing customer satisfaction indicating that mobile payments has secured its place in the financial market.
Today we are in a more connected and cashless world and mobile payments are the key in this process. They have started to play a pivotal role in shaping the financial landscape, redefining how we perceive and interact with money. Stakeholders such as customers, businesses, governments and financial institutions must navigate this evolving area thoughtfully to harness the full potential of mobile payments for a more inclusive and efficient global economy.
When discussing the future of payments, we must consider the impact of two major phenomena. Consumer behaviour is evolving, and financial services are becoming more digitally transformed. The need to focus on customer experience rather than technologies or their integration into payment systems is the major issue that needs to be highlighted for end-users to adapt to new payment methods. Because it’s easier to change behaviours when the consumer experience is well-designed.
