US Mobile Payments To Reach $90B By 2017 - Forbes

US Mobile Payments To Reach $90B By 2017 - Forbes

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1/16/2013 @ 3:04PM |285 views

US Mobile Payments To Reach $90B By 2017

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This week, the National Retail Federation (NRF) held its 102nd Annual Convention and EXPO —Retail’s Big Show 2013. Attendees gathered from around the world to demo products and services and exchange ideas about the future of retail, including mobile payments. Mobile payments have captured the attention and imagination of industry insiders, venture capital investors, and innovators. Although retailer investment and consumer adoption have been nascent to date, we see that changing. Forrester forecasts that US mobile payments will reach $90B in 2017, a 48% compound annual growth rate (CAGR) from the $12.8B spent in 2012.

Denée Carrington

In my new report out today, titled “US Mobile Payments Forecast, 2013 To 2017”, I outline the growth drivers and inhibitors for the three mobile payments categories: mobile proximity, or in-store payments; mobile peer-to-peer (P2P) and remittances; and mobile remote commerce, or mCommerce. Here are the key takeaways:

• Mobile payments adoption will be fueled by unprecedented growth in proximity payments. Mobile proximity payments are currently the smallest category within mobile payments, but we expect it to be the fastest growing. Proximity payments will reach $41B, making up nearly half of all mobile payments in 2017. Lower barriers to adoption, increased convenience, and early entrants striving for scale will be important drivers of growth.
• Despite growth in P2P payments, mobile remittances will lag behind. There are several types of mobile remittances, including domestic P2P, cross-border P2P, and bill payment.Mobile remittances will exceed $4B over the next five years but will fail to achieve the scale of mobile proximity payments or mCommerce. Mobile P2P will make up more than 90% of the mobile remittance category but will be hampered by its economics. Future growth will be realized in cross-border remittances, which are ripe for disruption, and in the rapidly evolving area of mobile bill pay.
• Consumers adopt mobile payments when it’s clearly better than the next best alternative. Mobile remote payments, or mCommerce, are currently 90% of the mobile payments category and will continue to grow. mCommerce offers a better alternative to shoppers in certain contexts. The growth of mobile proximity payments, mobile remittances, and mobile remote payments hinges on this reality —each must deliver a better, more convenient option to consumers than the next best payment alternative for a given purchase at a given time.

During Retail’s Big Show 2013, I met with several vendors, including First Data, Ingenico, Isis Mobile Wallet, Marqueta, Natural Security, NCR, PayPal, Q-Thru, Revel Systems, and Wincor Nixdorf. These companies, and many others, intend to deliver solutions to provide a smarter, more convenient, more secure commerce experience for consumers and merchants. Yet, the reality is that changing consumer behavior isn’t easy, and merchants have many competing investment priorities. Mobile payment and digital wallet providers face significant hurdles to achieving adoption at scale, and 2013 will be a pivotal year in that quest. This year will mark the beginning of the end for some mobile payment solutions as competition heightens and expectations for economic outcomes rise. But those that deliver value, convenience, and a clearly better alternative for both merchants and consumers will thrive as mobile payment adoption accelerates.

Denée Carrington is a senior analyst at Forrester Research, serving consumer product strategy professionals. Follow her on Twitter @deneecarrington.