Something is in the air — and it’s helping retailers ease shoppers through the purchase process.
Contactless payment tech, which lets consumers pay with a wave of a watch or phone, is picking up momentum.
Over the past week alone, Apple revealed that it’s bringing Apple Pay to 7-Eleven stores and into CVS pharmacies — which held off on supporting the iOS mobile wallet since its inception, choosing rival platforms and creating its own solution. Tim Cook, Apple’s chief executive officer, told investors last week that Apple Pay handled more than 1 billion transactions in the third quarter. That growth marks a threefold increase over a year earlier and bests dedicated third-party services like Square and PayPal.
And Juniper Research forecasts Apple Pay is headed toward another milestone: By 2020, the four-year-old technology will represent half of all contactless mobile wallet users serviced by OEMs (original equipment manufacturers).
In total, the firm projects the momentum of Apple Pay, Samsung Pay, Google Pay and other OEM Pay wallets will shoot up over the next few years, nabbing 450 million users and covering more than $300 billion in transactions by 2020, for a total of 15 percent of total point-of-sale payments in stores.
“Growth over the next five years will continue to be dominated by offerings from the major OEM players,” said Juniper’s head of research Nitin Bhas, the report’s author. “Additionally, we now have the likes of Huawei Pay and Fitbit Pay launching in several markets; this is now included in Juniper’s contactless forecasts.” Fossil just got in the game as well, supporting near field communications (NFC) technology in its latest crop of Wear OS smartwatches, which can tie into Google Pay.
With adoption increase, technical options expanding and more providers entering the market, the European Union has mulled over how the payments industry should manage security, customer experiences and so on. The European Payments Council last month updated its Mobile Contactless SEPA Card Payments Interoperability Implementation Guidelines, which previously only covered contactless mobile payments based on NFC, to cover other technologies, such as cloud-based solutions, Universal Integrated Circuit Cards and other secure integrated elements.
The future is still wide open with mobile-wallet players pursuing several paths forward. In addition to paying at in-store checkout terminals, the various offerings can also hold passes and airline tickets, send payments to friends or act as an ATM card. On Thursday, Chase said customers with Google Pay or Samsung Pay would be able to pull cash from the banking machines.
In retail, tapping to pay with devices has still a way to go before it graduates to default consumer behavior — at least in the U.S. But it’s clear that after a slow start, mobile payments’ growing reach is pushing the technology toward an inflection point.
Retailers are familiar with the concept of “removing friction” — eliminating shopper irritations or delays — in the buying experience. In payments, that translates to easier ways of conducting transactions.
While some tech companies, such as Amazon and Microsoft, want to do away with checkout lines and payment terminals entirely, streamlining the checkout experience is much more accessible in the near term.
But the payment process is clearly on the move. In April, Mastercard, Discover, American Express and Visa all said they had plans to ditch credit card signatures as chip technology is more secure.
“The payments landscape has evolved to the point where we can now eliminate this pain point for our merchants,” said Jaromir Divilek, executive vice president of global network business at American Express. “Our fraud capabilities have advanced so that signatures are no longer necessary to fight fraud.”
Security is a major aspect. Mobile wallet consumers can tap their device on a terminal, and know that their financial data is encrypted — in a separate area of the phone with tighter security — and it’s guarded by a fingerprint, face scan, pin code or some combination of those approaches.
The rise of mobile payments also opens up opportunities for stores to get close to their customers. Apple Pay has long supported loyalty and store-branded cards, and retailers such as Kohl’s are using it as a foundation, with the chain combining the iPhone wallet with its Yes2You program.
In that context, a simple bump of the phone or watch can replace the wallet-fishing for cash or plastic, the club or loyalty cards and the authenticating signature. In some key Asian markets, mobile payments have already taken off. In China, WeChat Pay and AliPay are the mobile payments juggernauts, with the former boasting 600 million users and the latter set at 520 million users.
Now, after years of experimentation and development, it looks like Western markets might be ready to embrace the technology as well.