The mobile payments industry has taken on a life of its own and the technology is here to stay. Not only are there more merchants than ever who accept credit cards and digital payments via mobile devices, but consumers are increasingly warming to the idea of using their smartphones to make purchases as well. If your business is considering accepting mobile payments or if it's already doing so, here are five trends in mobile payments to keep an eye on.
1. Adoption of mobile payments will continue to rise
Although adoption of mobile payments and mobile credit card processing was initially slow, the number of merchants and consumers that use mobile devices to process transactions has skyrocketed.
"The mobile payment industry has exploded over the past couple of years, with almost everyone using smart phones that are capable of using card readers," said Evan Hutchinson, owner of business consulting firm Hutchinson Group LLC. Because anyone can easily sign up for a mobile payment account and start accepting payments almost instantly, this explosion won't be contained anytime soon. "As we slowly turn into a cashless society, the amount businesses and everyday consumers who have a mobile payment account will only grow." [26 Ways to Accept Mobile Payments]
This growth is also apparent in that major financial institutions, not just credit card processing companies, are investing in mobile payments.
"Seeing the opportunity for revenue growth, Bank of America and Chase have also introduced mobile payment solutions within the past couple of years," Hutchinson said.
Though not confirmed by the company, there is also a rumor that American Express will soon be offering a mobile payment solution as well, he said.
"Mobile payment technology isn't a fad or something that will slowly fade away into the ether of has-been technology," Hutchinson said. Although still in its infancy, mobile payments is a sub-industry that will continue to advance as more and more businesses and consumers go wireless to accept and send money, he said.
2. Ease of use and lower cost will drive NFC adoption
From mobile credit card processing to mobile wallets, there are several ways to accept mobile payments. Near field communication, however, will be driven by its ease of use for both merchants and consumers.
"[Given] the number of handsets that are capable of making transactions through NFC, both customers and merchants are more willing to adopt its use," said Gokhan Inonu, president of Cardtek USA, a payment systems solutions provider.
This isn't just because using NFC is coolest thing on the block, but it makes completing payments faster and easier than traditional POS systems, Inonu said. Additionally, implementing NFC payment systems is also cheaper for businesses.
"Since traditional POS terminals are expensive for some businesses, enabling mobile devices to accept card payments with small add-ons are being highly accepted," Inonu said. "With the evolving technologies, customers, merchants are more willing to use the new devices to accept card payments."
3. Legacy payment apps will transition to cloud-based mobile solutions
Just as most business systems are transitioning, if not already fully integrated, into the cloud, payment apps and point-of-sale (POS) system will as well.
"This mobile/cloud revolution started at the beginning of the decade with apps such as Square and GoPayment that were targeting the smaller micro-businesses," said Pascal Nicolas, CEO of POS systems provider SalesVu.
Looking at trends over the past few years, these solutions are taking over traditional POS systems and will continue to do so for the masses.
"The fact that Amazon and Apple are getting into the business will help push these technologies to the mainstream and could make obsolete the traditional desktop-based systems that you currently see at your local retail store, restaurant, bar, salon, spa or repair shop."
This revolution will enable business owners to provide greater customized and personalized services to their customers, he said.
For example, SalesVu's system lets businesses automate email marketing campaigns by sending offers to specific customers based on visit frequency, the number of days they haven't visited, or if they make a specific type of purchase.
"These trends are slowly bringing to reality marketing methods that used to only appear in science fiction movies such as 'Minority Report,'" Nicolas said.
[For a side-by-side comparison of the best mobile credit card processing service, visit our sister site Top Ten Reviews.]
4. Security will remain a top priority
Security and data protection have always been a primary concern for payment processors, merchants and consumers alike. But as more breaches occur, firms everywhere are patching security exploits left and right.
"That's priority number one for these companies given that they will be taking on the liability for your money flowing through their service," said Chris Losacco, mobile strategist at Punchkick Interactive, a mobile-tech agency.
As such, security will continue to improve and integrate both technology and personal validation measures.
"With respect to tech, these firms will continue to leverage 128-bit encryption (the highest level that is commercially available) and SSL 3.0 at a minimum," Losacco said. "The personal validation piece relates to ensuring that two-factor authentication is present as well, only authorizing a transaction when the user presents at least two of three validation factors."
The three validation factors are: Who You Are, which consists of biometrics (fingerprint or retinal scan); What You Have as a payment device; and What You Know, such as a password or PIN.
Improving security measures is more critical now than ever, as consumers have grown distrustful of new technologies while becoming more cognizant of security risks of mobile payments.
"They're scared and just now realizing that identity theft is a real concern," Losacco said. "They're finally learning to understand the power of the device that they desperately clutch at all times and how to wield it in an intelligent way."
The most effective way to increase consumer confidence is to ensure the privacy of their personal information.
"As soon as someone can show them that a mobile payments system will keep them safe, not sell them out, and simultaneously provide an actual time savings or value add — like leaving your wallet at home — [mobile credit card processors] might actually have a chance at cracking the nut," Losacco said.
5. Newcomers won't become major players just yet
Thinking about trying out the latest mobile credit card reader? If you want to work with a major player in the industry, you may want to wait before trying out a newcomer. Not only is the industry already saturated — with distinct leaders like Square, ROAMpay and PayPal — but the market itself is still trying to learn about mobile credit card processing technology. One big-name example is Amazon's rumored new credit card reader.
"Amazon has a lot of customers but seems to be entering some tech spaces a bit late," said Max Roper, founder of Appetize, an entertainment POS solutions provider. "With their new phone, customers are expecting to have the flexibility and usability of iOS and Android but seem to be disappointed thus far, unless you use Amazon for all your media and retail purchasing."
Roper predicts a comparable result for Amazon's venture into mobile credit card processing.
"Entering the credit card processing space would have a similar outcome," Roper said. "They would build on what we all have learned over the years on mobile payments, but still be a few years behind the leaders in the space."