Mobile Payment – A Trend to Watch in 2017

Note: This post was originally posted in LinkedIn in January 18th, 2017.

The days of fumbling through a wallet, pocketbook, or purse at the check stand are coming to an end. Research and Markets reported that the global mobile wallet market is expected to reach $635 billion by 2020 from $113.5 billion in 2015 at the compound annual growth rate (GAGR) of 41.1%. Allied Market Research predicts that the global mobile payments market will reach 3,388 billion by 2022, growing at the CAGR of 33.4%.

This climbing trend will continue as mobile becomes more and more a part of our lives. Are you taking advantage of your mobile phone’s payment capabilities for your retail purchases? Do you know how? I will summarize the basics of Near Field Communication (NFC) mobile wallet in this post since we have a few options in the US market right now.

A mobile wallet enables you to use your mobile phone for making payments. During the set-up of a mobile wallet app, your credit card information is entered and saved to your mobile wallet. All you need to do at the check stand is open the app on your phone, tap or hold it against the cashier card reader, and your payment will be processed with the selected credit card.

The underlying technology enabling tap to pay is NFC – a short-range wireless connectivity technology that makes use of interacting electromagnetic radio fields. An NFC mobile wallet is composed of a few components: a mobile application (app), payment options (credit cards), an authentication method for user identification, and an NFC chip for wireless transmission or Host Card Emulation (HCE) software structure for an app to emulate a card and talk to an NFC card reader directly.

Currently, there are a few mobile payment apps as follows:

Apple Pay is a NFC mobile wallet app provided by Apple launched in October 2014. It works with the iPhone 6, iPhone 6+, iPhone sequential releases, and even the iWatch. An NFC chip is embedded in the Apple devices to enable the Apple Pay tapping and paying.

Samsung Pay was released in August 2015. Not only does it work with NFC, Samsung phones are also equipped with Mobile Secure Transmission (MST) technology that emulates a swipe transaction through the swipe reader in case the reader is not NFC enabled, broadening the purchasing power of your mobile device. Samsung also plans to release Samsung Pay Mini in early 2017, which could also allow non-Galaxy devices to benefit from Samsung Pay. However this may exclude integration with Apple devices, as Apple store rejected Samsung Pay app in December 2016.

Android Pay, a Google Wallet, was released in September 2015. It works with all NFC-enabled Android devices running KitKat 4.4 and above. Android Pay uses Host Card Emulation (HCE) technology to interact with NFC payment terminals.

Microsoft Wallet is available in Microsoft insider. Windows 10 for phones support Host Card Emulation (HCE). HCE will allow any smartphone with Windows 10 and NFC hardware to transmit payments from the device to an NFC terminal designed to receive that money but without needing a special secure app like Softcard. It also won’t require any secure SIMs from wireless carriers.

In October 2015, US banks and processing networks implemented Fraud Lability Shift. Almost all credit card readers were replaced with EMV compliant readers. EMV (Europay, MasterCard and Visa) is a global standard for credit cards that uses computer chips to authenticate chip-card transactions. Most the EMV-compliant credit card readers (Point of Sale) are also NFC-enabled. This transition significantly expands the potential for widespread NFC mobile payment adoption.

In addition to this, more education and incentives are rolling out to encourage consumers to use mobile payment. For example, the number of daily Samsung Pay users has doubled every week since the launch of Samsung Rewards in the US in November 2016. Likewise, consumers are rewarded if they pay with Apple Pay at participating 300,000 self-serving cashless vending machine.

Will 2017 be the year that Mobile Wallets really take off? Will you be ready for this new era of purchasing?