Will 2016 finally be the year of the mobile? What new buzzwords and functionalities will make headlines? Will we ever actually find out what 3D Secure 2.0 is going to involve? Bethan Cowper, head of marketing and PR at Compass Plus, examines the answers
Predicting the future of the payments industry a year at a time has never been that challenging in the past, though some payment experts might argue otherwise. Payments generally isn’t a fast moving space, new ideas are generated quickly, however adoption comes at a much slower rate. For example, mobile payments have been around a long time; since Coca-Cola introduced vending machines that could accept mobile SMS payments in 1997, contactless payments have been offered by a number of global giants since 2008, and NFC has had a much more volatile journey approved as an ISO/IEC standard in 2003, with its success completely dependent on the support of hardware device manufacturers.
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The difference between 2016 and previous years is that now need, technology and adoption are ready to converge; not only is the industry ready, but financial institutions, merchants and consumers are finally getting on board as well. Whilst there might be discrepancies in behaviour between demographics and culture, consumers are increasingly aware and more accepting of the digital age, which is now poised on the cusp of stepping out of the niche and into the mainstream.
The Nordics are leading the way in the race towards cashless societies, with the Danish government recently proposing that retailers should no longer be obligated to accept cash payments, and Sweden severely reducing the amount of cash in circulation. The rest of the globe is not quite as prepared to support the demise of cash, however, 2015 was the year that digital payments finally eclipsed cash in the UK and in the US non-cash payments are set to grow exponentially, fuelled by economic recovery.
The dawn of the mainstream digital age is by no means exclusive to the more developed regions of the world. On the contrary, many global innovations are being led by emerging markets, born out of a combination of necessity and government initiatives. Stepping aside from our favourite case study of mobile payments in Kenya, Nigeria has introduced a contactless, prepaid, and biometric national identity card to combat financial inclusion, whilst Brazil is pushing both mobile and contactless in the run up to the 2016 Olympic Games. Zimbabwe, Mexico, Bangladesh and the Philippines are making substantial headway with P2P payments, and according to The Mobile Consumer, more consumers in Asia Pacific use their mobile to buy goods and services than any other region in the world (at 46%) and in China there are three times more mobile phones than there are bank cards.
With the correct groundwork in place, 2016 looks set to become the year the predictions the industry has been making around contactless, mobile and even biometrics evolving out of the niche finally come into fruition, geography depending. Not at the expense of the death of cash however; the availability and increasing popularity of the digital channels on offer provide options not replacement. Cash is a very culturally important channel within the payments ecosystem; not to be ignored or underestimated. Different regions show a distinct preference for cash based on traditions and customs that define them, for example, the ability to barter. The Middle East is not suddenly going to move away from cash on delivery in 2016, however, the options available mean that consumers in this region can now explore other avenues such as mobile or the prepaid cards and merchants can incentivise this behaviour.
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By GlobalDataIn the UK, 2016 looks set to be the year of the contactless card, whilst Japan looks to continue the growth of biometric authentication at the ATM. In the US, the debit card market is predicted to take off as FIs become more rate-sensitive, and cash use will continue to decline in Belgium, France and Canada. It is possibly the most exciting time in payments since the introduction of the payment card, and this is without delving into the ongoing technical developments into payments security and open development platforms. In short, 2016 will be the year that digital wears the payments crown.
