Jan 07 2020
With the smartphone firmly cemented as a fixture of daily life, tech companies seek to capitalize on the smartphone’s newest role: the digital wallet. Mobile payment has become ubiquitous, largely due to the inclusion of near-field communication technology in smartphones.
With regard to the Finance & Insurance sector (IBISWorld report 52), mobile payment has grown to become a substantial branch of the financial technology (fintech), subsector. The growing adoption of this technology has rearranged supply chains while advancing commerce across numerous industries both large and small.
For instance, this holiday season, Salvation Army accepted both Apple Pay and Google Pay at its donation collection points nationwide. Overall, several factors have driven the growth of mobile payment, including the rise in mobile internet connections and a heightened emphasis on both software and hardware security. These factors have also formed the basis upon which companies within the Information sector (report 51) will capitalize on the convenience and security of mobile payments.
Mobile internet connections and security
Mobile payment methods have become popular largely as a result of their convenience, which has been facilitated by a rising number of mobile internet connections. Increases in mobile internet connections are largely connected to the proliferation of smartphones and the increasing affordability of mobile internet services. IBISWorld estimates the number of mobile internet connections increased an annualized 10.3% over the five years to 2019. The ubiquity and accessibility of mobile internet connections has laid the foundation upon which large tech companies and other mobile payment processors hope to further build out and popularize mobile payment.
Another factor strengthening the connection between mobile internet connections and mobile payment is their security. Cellular network services such as 4G LTE encrypt data, thus thwarting the unwanted interception of sensitive data such as credit card numbers and identity-related information.
In addition to security on the software level, smartphone producers have also invested significant resources into hardware security. The robust security of current hardware (i.e. smartphones and point-of-sale systems) ensures that theft or loss of a device will not compromise one’s financial resources, as would be the case with a stolen or lost wallet. Thus, the dual security of software and hardware has arguably surpassed that of physical credit cards.
The future of mobile payments
Moving forward, large tech companies that have invested significantly in mobile payment platforms will further attempt to incentivize the adoption of the mobile wallet. The latest and most prominent example is of Apple's Apple Card, developed in conjunction with Goldman Sachs. Cardholders are incentivized to use Apple Pay through their mobile devices to earn greater cashback rewards than if a customer swipes their physical Apple Card. Other mobile payment operators are expected to follow this strategy of introducing mobile payment incentives to increase their user bases and garner market share. Such incentives are expected to boost mobile wallet adoption in the coming years.
For related industry coverage on mobile payment technology, discover our recent Analyst Insight on Industry Insider discussing The Top Five Industries Revolutionized by Online Payment Processing!
Edited by Sean Egan, Copy Editor
Infographic Design by Veronica Albarella, Copy Editor