Mobile Payments Will Soon Be A Quarter Of Total Card Usage
Mercator expects mobile payment volumes to hit 25 percent of total card throughput and 20 percent of total retail sales, or $900 billion, by 2020. That includes card on file transactions, such as those made within an Amazon account or to pay a utility bill; mobile checkouts, in which trusted networks are involved; contactless payments such as bar codes, QR codes, and NFC; and digital wallets.
However, it can be difficult for FIs to figure out which basket – credit, debit, or prepaid – is the best place to put their eggs. 52 percent of mobile payments still come through as credit cards, and consumer attitudes change more slowly than technology, so how important is it to invest elsewhere?
Still important, as it turns out. Here’s what Mercator expects to see in the new year.
Consumers have more options than ever, but according to Brian Riley, Director of Credit, credit cards still dominate the network.
For many financial institutions (FIs), credit cards have become part of a broader strategy to digitize payments, as well as an acquisition vehicle for new, digitally-savvy customers. Chase, for example, books three-quarters of its new accounts through digital channels, then uses those channels to communicate with customers. This helps form the muscle memory for users to turn to their mobile device first whenever they need to manage their money or resolve an issue.
Riley says risk is a major concern with card-not-present (CNP) transactions, and that is felt by issuers, retailers, and consumers alike. CNP fraud is a $6.5 billion problem in the US. Tokenization will prove the most important counter-measure when it comes to moving the needle on mobile credit card payments.
US consumers have not favored debit cards in digital environments, perceiving them to be more vulnerable. They would rather lose the issuer’s money than their own funds out of a debit account, and they are not interested in the onerous process of resolving unauthorized transactions on a checking account – not when the more straightforward options of credit and prepaid cards are available.
However, according to Sarah Grotta, Director of Debit and Alternative Products, the message of safety in these transaction types is finally starting to resonate with consumers. A recent Mercator survey showed that consumers who prefer debit jumped from 38 percent in 2016 to 43 percent in 2017.
We are seeing more consumers use mobile debit more frequently, whether to exercise card controls or send peer-to-peer (P2P) funds in apps. Grotta says issuers can continue to drive change by pursuing best practices like helping consumers enter credentials into apps as effortlessly as possible, protect credentials once they’ve been entered, and shoring up other security tactics such as preventing false positives and resolving disputes.
Two to three years ago, mobile remote deposit capture paved the way for significant growth in consumer handset mobile usage. More recently, gift cards have seen mobile commerce purchases increase, often by people who buy gift cards for themselves to use on digital channels.
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