American Marketing Association of Las Vegas

Mobile Payments, Global Adoption

Consumers in Asia Pacific and Africa regularly use their smartphones to pay on the go—and the rest of the world is catching up

The world is mobile, and the world’s currencies are, too. According to the February 2014 Nielsen study, “Global Payment Gateways of the Future,” which polled more than 30,000 consumers in 60 countries through an online survey in August 2013, the use of mobile payment technology has more than tripled in the past two years.

Globally, mobile “e-wallets,” which connect consumers’ mobile devices to their credit and debit cards, as well as their loyalty cards, are the preferred form of payment for everyday transactions for 19% of respondents, according to the Nielsen survey, but experts say that mobile-payment smartphone apps powered by near-field communication technology (NFC) are being adopted at a quicker pace. The apps allow consumers to pay for purchases in retail locations by tapping their phones on a point-of-sale device at the register. Consumers can download retailer-specific mobile payment apps, such as Starbucks’ app, which saves a customer’s prepaid card information and allows for NFC payment.

As more tech brands back mobile payment efforts—such as Apple’s October 2014 release of Apple Pay, a mobile payment system for iPhones—consumers’ trust in the payment technology likely will grow, experts say. Here’s a quick look at current mobile payment behaviors around the world.

Asia Pacific trusts mobile e-commerce. New Zealand leads the pack in e-wallet adoption at 44% and China follows at 30%, according to Nielsen’s research. Respondents in the Asia-Pacific region report the highest level of confidence, at 65%, in the safety of using or linking credit, debit and prepaid cards to mobile devices, compared with 41% in North America. The growth of e-commerce transactions in Asia is expected to top $400 trillion by the end of 2014 and account for nearly one-third of global B-to-C e-commerce sales, according to Nielsen.

“Asia has historically been the lead in mobile adoption for a few reasons,” says Doug Rozen, chief innovation officer at New York-based creative marketing firm Meredith Xcelerated Marketing, who has worked on campaigns for JPMorgan Chase, Bank of America and American Express, among others. “One, they did not have an established infrastructure around traditional commerce, so as they were creating that infrastructure, they were able to leapfrog. Second, they have very strong wireless networks. Third, they have great technology. Those three things together have always made Asia a more advanced user group than anywhere else.”

Africa isn’t far behind. As in Asia Pacific, African nations have adopted mobile payment technology quickly because the nascent technology isn’t competing with a long-established banking system, experts say.

Kenya, for example, has adopted a system that does not require consumers to be linked to a bank or credit institution. Called M-Pesa, the system was created by mobile service provider Safaricom and mobile phone brand Vodafone in 2007. Money is loaded into personal M-Pesa accounts at kiosk locations in stores and gas stations, and can be transferred via text message, according to the company. This largely “un-banked” mobile payment system is being adopted in other African countries, as well, as mobile phones become more ubiquitous across the continent where landlines are few and far between, according to the World Bank.

Person-to-person payments are the largest category of transactions in African nations, with 70% of sub-Saharan Africans using person-to-person payments given the economies built on migrant workers and the money being sent to families from outside Africa, according to a February 2014 report from McKinsey & Co. on 44 sub-Saharan African nations, called “Sub-Saharan Africa: A Major Potential Revenue Opportunity for Digital Payments.” Two-thirds of adults in all of sub-Saharan Africa use mobile phones, and mobile payment penetration has reached 86% of Kenyan households, the report says. While the majority of remittances in sub-Saharan Africa remain cash-based, regulations are paving the way for more non-bank institutions to run mobile-payment programs, according to McKinsey.

“The primary reason phone-based systems have proliferated in Africa is simply need,” according to Ken Madden, head of engagement at Dallas-based shopper marketing firm Shoptology Inc., where he works with clients such as Benefit and Jet Blue on e-commerce campaigns. “Mobile payments enabled transactions in Africa that were either not possible, or very difficult. [M-Pesa] very quickly narrowed their primary focus to remittance, transferring money from people making money in the city to family and friends in rural areas. This wasn’t a replacement for cash transactions. These transactions were just really difficult or impossible with cash. With mobile reaching these rural areas, it was a real opportunity.”

Barriers to adoption remain in the U.S. In the U.S., credit card companies have been incorporating NFC chips into their cards since about 2003, when MasterCard launched cards enabled with PayPass, but the technology hasn’t taken off for two reasons: consumers’ lack of trust and the cost of implementation for merchants, Madden says. Retailers have to be willing and able to invest in the installation of NFC devices at their registers, and U.S. consumers—who are accustomed to swiping their credit cards and then entering their pin numbers or supplying their signatures—remain wary of the touch-payment practice.

U.S. consumers’ privacy concerns regarding NFC-enabled payment technology largely can be allayed if marketers help provide a better understanding of how the technology works, which Apple and others are addressing, Madden says. “The most difficult [challenge] for any of the mobile payment platforms to overcome, since this is a complexity of what privacy means for mobile payments, is people understanding the nuances of, say, Apple Pay and its unique code approach to each transaction,” he says. “I’m not sure if the average consumer really understands what that means and how that adds to their privacy and security. That’s something that we’re seeing turn a corner in the markets, though, as major retailers and tech brands have decided to make [education] a priority.”

To get retailers to be willing to invest in NFC technology, companies should look to M-Pesa as a model, Madden says. “[M-Pesa was] successful in building trust on top of an already trusted mobile provider brand, which is an advantage that Apple has since millions of people already trust them with their credit card info. Finally, they set up good incentives for merchants to sign up to accept M-Pesa while also providing incentives for shoppers to use M-Pesa.”

Security matters. Forty-six percent of respondents to Nielsen’s global survey have security concerns about shopping online and using their credit, debit or prepaid retailer or gift cards on smartphones or tablets, and U.S. consumers report being the most concerned. Fifty-nine percent of U.S. consumers wouldn’t shop online with a smartphone or tablet for fear of privacy issues, compared with 55% of consumers in the Middle East and Africa, and 35% in Asia Pacific.

Despite consumers’ reluctance to plug credit card data into mobile devices, mobile payments may actually become the safer choice in some regions, Madden says. “[Some] mobile payment varieties are really more about approaching the un-banked consumer, and providing him an alternative to credit cards where he has an opportunity to put cash against a mobile payment structure, which opens up commerce, and ensures the safety of transactions where maybe carrying cash is not the safest thing.”

This was originally published in the November 2014 issue of Marketing News​.​​

About the author: Molly Soat is a staff writer for Marketing News and Marketing News Weekly. E-mail her at msoat@ama.org.

Categories: Mobile,Strategies.

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