While half of all American retail transactions are still completed in cash, smartphones may soon change that.
When it comes to retail purchases in-store in the United States, about 50 percent are still being completed with cash, but according to Ajay Banga, the CEO of MasterCard, mobile payments will start to change that, and it won’t be long before it happens.
Banga spoke of his opinion on mobile solutions at the Deutsche Bank Global Financial Services Investor Conference.
He explained that the area in which mobile payments will make the most striking impact is in the percentage of transactions that it will be taking from cash as opposed to plastic cards. He said that he feels that smartphone based transactions are the way ahead, pointing out that in the United States, we feel as though credit and debit cards are essentially ubiquitous, but when it all comes down to it, half of all purchases are made with cash.
Both mobile payments and cash are being used primarily for smaller ticket purchases.
While smartphones may not be making much of a dent into larger purchases, people do seem willing to buy with their mobile devices with the total is a smaller one. That also happens to be the area in which people are most likely to pay with cash. Therefore, what Banga is predicting is that it will be cash, not necessarily plastic cards, that will start to be replaced by the use of these devices at the checkout counter.
Therefore, for items like a cup of coffee, picking up a container of milk at the supermarket on the way home from work, or picking up a pack of gum at the convenience store, a rising number of transactions will be completed through the use of m-payments instead of cash. This may also start to have an impact in other areas that have been traditionally based on cash transactions, such as taxi fares, which are still relatively new to the credit card scene.
Mobile payments are still trying to find their place when it comes to adoption and regular use and, if MasterCard’s CEO is right, it isn’t the credit card transactions that will be taken over by this technology, but the cash ones.
A new report has shown that during the first quarter, alone, transactions reached the $623 billion mark.
According to a recent report that was released by the People’s Bank of China, m-payments were responsible for approximately $623 billion during the first quarter of 2014.
That market is clearly loving paying over mobile phones and consumers are rapidly adopting this tech.
The use of m-payments has skyrocketed in China by 255 percent during the first quarter, alone, when compared to the same quarter in 2013. This report underscores the trend toward mobile when it comes to the spending habits of consumers in China. This has made the country a world leader when it comes to the adoption and use of this technology, which has seen little more than struggles in convincing consumers to try it for the first time, let alone use it on a regular basis.
M-payments growth is to be expected in a market where 283 million smartphones will be shipped, this year.
In China, the use of the internet is also spiking at a similar pace, over both mobile devices and over laptops. Some of the primary evidence of this trend is over the giant, Alibaba, that has been pushing its products over both channels and which has seen a staggering 66 percent year over year growth within this year’s first quarter. Bolstered by mobile payments, that company brought in $3.1 billion in the first three months of 2014.
That said, the achievement pales in comparison to last year’s Singles Day in November. That holiday is a celebration of being single. Tmall and Taobao – both companies owned by Alibaba – took in $5.75 billion in revenue during that single day. That brought about an increase of 80 percent in the sales that were experienced on that day, when compared to the year before. This has been greatly credited to the rise of the use of mobile devices for shopping.
A PwC survey that was conducted in China last year showed that at that time, shoppers in the country were already using their smartphones and tablets to buy on a daily basis, while 62 percent were doing so weekly. This was a 96 percent raise over 2012’s figures and makes it evident that m-payments – just like mobile commerce – will continue their popularity and growth in the country.
