Many card Issuers believe that within the next few years 25% or more of debit transactions will migrate to mobile payments (Daly, 2016). An interesting comparison was done by Karen Webster on “What Mobile Payments can learn from Debit Cards.” Debit card volume increased $52.1 billion from 1991 to 1997. In the article it details what debit cards had on their side to take off in 1995 that mobile payments still lack. Some of the things mentioned:
- MasterCard and Visa used technology that merchants already had and paid for, unlike now where we are asking merchant’s to buy terminals with NFC to enable mobile acceptance
- The critical mass adoption and value perception is not strong and therefore is not driving usage. Checks were a pain to write, pulling out your phone is not that much more convenient than pulling out your wallet to pay.
- There needs to be a study on lack of demand first in order to determine the best way to enter the market
- Because issuers pushed their debit cards to consumers as an easier way to pay for items in store (especially in supermarkets where customers had to wait in line as the person in front of them wrote a check), there became a big market outcry for merchants to accept debit cards
- Issuers make interchange fees off of debit card holders. So it is an additional profit center for their bank so why not push consumers to use their cards.
- Debit card really was consumer and merchant friendly whereas pulling out your cellphone might not always deliver the seamless payment you hoped to obtain. Your phone might be dead or the app might not work properly. Another app might get in the way of your purchase or a phone call
- In addition, merchants were provided low rates to incentivize them to promote acceptance and process debit cards (Webster, 2016).
Although 34% of small businesses accept mobile payments (Woodward, 2016), as of April 2016 only 25% of all eligible users have tried Apple Pay, Android Pay, and/or Samsung Pay (While this is down 17% from July 2015, the availability of mobile payment platforms has continued to increase since July 2015). While the number of businesses accepting mobile payments is increasing, many stores do not promote that they accept mobile payments nor do they have personnel that know the terminals are capable of accepting mobile payments. Without a sign or person reminding someone checking out of the mobile payment acceptance, many customers do not remember or know to pay with their mobile payment solution. Mobile payments continues to have slower than anticipated adoption; it is being utilized for smaller purchases, approximately 17% of users’ discretionary spending. Many anticipate that as more merchants accept mobile payments the number of consumers utilizing mobile payments will only continue to increase. By 2020 it is estimated that mobile payment volume will reach $503 billion (Meola, 2016).
These predictions of mobile payment volume increase provide hopeful validation that mobile payments will take off, but it may not be as swift moving as debit cards were in the 90s. The drive to use debit and card based payments was a movement started by MasterCard and Visa, adopted quickly by the Issuers, and the Issuers pushed demand to the consumers; therefore, demand from the consumers increase the demand from the merchants.
With mobile payments there is a pull by consumers and merchants to begin using mobile payment; however, there is a lack of push by the Issuers and Networks. For the Issuers and Networks there is no additional benefit of pushing for mobile payments, they get the same percentage per transaction whether a person uses a card or mobile phone. Therefore, in order for mobile payments to take off, consumers and merchants will have to generate the demand and growth of mobile payments.