Mobile payments does not seem like a scene from a futuristic movie anymore. Thanks to the increasing popularity of mobile payment technology, more and more people are switching to a cashless shopping. And this trend does not show signs of stopping.
In 2017 almost 780 billion US dollars were spent on mobile payments. In the year 2019 annual transaction volume of the global mobile payment market is projected to reach 1080 billion American dollars.
And while the dominance of mobile payments is going to happen worldwide in the nearest future, some countries embrace the technology faster.
Being the largest e-commerce market in the world, China predictably leads the way when it comes to mobile payment technology. Interestingly enough, Latin America is another promising market, for mobile money adoption.
We went on a hunt to find out why these emerging markets pull further ahead of the United States in mobile payments?
Keep reading to learn:
- How did China become almost a cashless consumer economy?
- Why are mobile payments on the rise in Latam countries?
- Why Mobile Payments Are More Popular in Latin America than They are the USA?
- What does this emerging trend mean to in your business?
Before entering the USA x Latin American landscape, we can’t talk about mobile payments before talking about China.
Eating out, shopping, transportation and even paying for the performance of street buskers – Chinese pay for just about everything in both online and “bricks and mortar” worlds with their phones. Residents of big Chinese cities stopped carrying cash almost entirely.
In 2016 alone, mobile payments in China totaled approximately $9 trillion, which means that Chinese buyers spent almost eleven times more using their mobile-wallets than their fellow-buyers from the United States.
The Chinese market offers a glimpse of what the global future of mobile payments will look like in time to come. Let’s take a quick detour to better understands how the walletless society started in China.
The credit card penetration rate in the Middle Kingdom has always been low in comparison to the rest of the world.
Culturally, Chinese people try to avert debts at all cost, which explains a slow nature of credit card adoption in the region. On top of that, the local government made it hard for international financial giants like Visa and Mastercard to enter the market, which also contributed to a low credit card penetration.
Besides, living in an extremely low-trust society, Chinese buyers were constantly afraid of being ripped-off, therefore they preferred good old cash and brick-and-mortar shopping over credit cards.
The mobile pay revolution in China first started when e-commerce giant Alibaba introduced their Alipay system as an alternative to traditional cash payments and overseas credit card solutions.
With the Alipay the risk of being scammed online was minimal, as the system would hold payments until shoppers received their goods. The fact that Alipay was an incredibly secure payment system made Chinese feel safe in not using cash. Unlike the U.S, where the credit card infrastructure is very developed, Chinese shoppers happily switched to the cashless shopping.
WeChat pushed mobile payments into even more peoples hands. As of the first quarter of 2018, WeChat had 1 billion active users worldwide.
Along with high mobile internet penetration and underdeveloped traditional financial market, these two platforms revolutionized a payment industry not only in China but all over the world as well.
Why Mobile Payments Are More Popular in Latin America than They are in the USA?
Similarly to a Chinese Market, Latin American mobile payments market is booming right now.
Being the home to almost 630 million potential mobile payers, the Latin American region is definitely a significant player in the world of mobile shoppers.
The local mobile payment market grows by leaps and bounds. Brazilian digital payment services provider PagSeguro reported a 107% revenue increase in the first quarter of 2018 in comparison to the last year.
The most significant two factors contributing to a quick mobile payment development are the early-adopting tech-savvy population and a large-scale market for walletless payments.
The USA mobile payment market, on the other hand, is developing much slower. Even though there are so many payment options Americans can choose from like PayPal, Visa Checkout, MasterPass, Apple Pay, Facebook Payments etc, study shows that only 6-8% Americans are using mobile payments regularly.
Out of 249.5 million adults in the United States of America, approximately 189 million own at least one credit card. And most of the US residents still prefer a good old plastic or even cheques over the modern technology.
Because the USA has an extremely developed credit card infrastructure, they are not rushing into building the new infrastructure for mobile payments.
The Latin American market is different. While smartphone penetration is extremely high in the region, the credit card penetration is on average below 20%. Since credit-card industry in Latin America has never taken off as much as it did in the States, local mobile payment market is developing much faster.
The mobile wallet revolution in Latam countries is happening primarily because, unlike US buyers, local Latin American shoppers are in need of alternative payment solutions.
Trending mobile payment solutions in Latin America
Since Latam customers are pulling off cards out of their wallets less than US buyers, big financial institutions like Visa, Mastercard, and Bank of America are constantly searching for alternative payment solutions.
For instance, the financial giant Visa has recently invested in mobile banking and payment solutions company YellowPepper. Because cash remains the king in the Latam region, with this investment Visa hopes to increase the usage of payments via Visa Direct.
With a large tech-savvy millennials population, mobile banking is definitely on the rise in the region. As of 2025, the smartphone penetration in the area is expected to reach 76%. With such impressive rates, developing mobile-friendly payment solutions seems somewhat appropriate in the Latam markets.
Having developed a mobile payment system also means that those who don’t have credit cards are able to transfer money across the region safely.
Not only do mobile phones connect people all over the Latin America across satellites, but they also join them financially too. In a long-term perspective, this would help to combat poverty and boost the economy in underdeveloped parts of the Latam region.
How to reach more mobile users, not only those with international credit cards
Along with private organizations developing the mobile payment technology, local Governments also contributes to the industry.
For example, the Boleto bancário, an official Brazilian payment method, was initially developed, so the people without bank accounts or credit cards could transact cash. This voucher payment method became and extremely popular alternative to wire transfer.
The boleto bancario is widely used to pay bills, taxes and even government fines. Moreover, boletos are so widely used in Brazil, that almost 30% of all e-commerce purchases are made with it. The electronic payment can be made both through one of the 200 000 ATMs in Brazil, or through mobile payment as well.
Interestingly enough, 38% of boleto payees prefer to pay with this method, because they are afraid of credit card fraud.
By accepting voucher payments your business can reach pretty much any payee in Brazil and increase conversion dramatically.
To help you to start selling in Brazil with local payment methods, EBANX came up with boleto bancario mobile solution. By creating a mobile-optimized boleto through the Ebanx you can reach most of the Brazilian mobile users, not only those with international credit cards.
What do mobile payments mean to your business?
Whether you are or a small brick-and-mortar business owner, or an online seller, you can definitely benefit from a “scan-and-pay” technology.
Quicker turnaround at the till also means that you can accommodate more shoppers in the same period of time, which directly translates into sales increase.
Not only do mobile payment help you make money, but they can also save your business a penny. Most of the time mobile payment solutions charge less per transaction than their credit card competitors. Cutting down on credit cards fees equates into considerable savings in the long run.
Protected by tokenization, mobile payments are more secure and reliable than traditional plastic.
Unlike with traditional credit card, mobile payment customer’s data is encrypted into a token ID number, which can only be used for a transaction once. Accepting these payment methods would mean providing a secure payment environment with the minimal fraud risk to your buyers.
Mobile payments also significantly simplify bookkeeping and operational processes. Data entry, invoicing, sending digital receipts to clients, inventory tracking and sales report generating – all these processes can be done automatically with the help of mobile payment solutions.
Should your business use mobile payments? An excellent customer experience that pay-by-scan methods provide makes it a no-brainer.
Digital wallets are undoubtedly the future of payments. The sooner your businesses embrace them, the better.
The rise of mobile technology is inevitable, and it’s only a matter of time before mobile payments take off the commerce world completely.
Although emerging economies like China and Latam countries have piggybacked on credit card technology, they focused their efforts on developing alternative mobile payments ecosystem. American market, on the other hand, is still lagging behind the rest of the developed world when it comes to embracing walletless payments.
What are your thoughts on the mobile payment revolution? Will your business be accepting mobile payments in the nearest future? Let us know in the comments down below!