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The Rise of Mobile Payments


Hana Dickman

The use of mobile payments by consumers has been rising steadily this decade, with growth expected to reach $721.4 billion in mobile payment volume by 2017. That’s up from $163.1 billion in 2012. According to a survey from Walker Sands Communication, 40% of participants had used mobile payment tools on their devices in 2014.

What Do Consumers Use Mobile Payments For?

A December 2014 survey from the Federal Reserve categorized how consumers and businesses use mobile payments. Top uses for 2014 included paying bills online and making in-app purchases, but other significant mobile payment activity covered in-store retail purchases via platforms such as Apple Pay and sending and receiving person-to-person or person-to-business payments.

Apple Expands Its Mobile Pay Services

One of the first truly mobile payment platforms to hit the big leagues was Apple Pay. Some critics dismissed the tech-giant’s new services, saying it wouldn’t catch on quickly and that consumers and retailers weren’t ready for such a leap in mobile consumerism. However, with cloud and other technical services making it increasingly easier for small and medium-sized businesses to accept mobile payments, Apple Pay was successful enough to continue toward expansion.

In August 2015, Apple announced a large expansion of the service. In conjunction with PayAnywhere, Apple is bringing mobile payments to 300,000 additional locations across the country. PayAnywhere is a credit card reader that works with mobile devices; at only $39.95, the device provides retailers and other businesses easy access to technology required to accept credit and debit card payments.

Jumping on the Mobile Pay Bandwagon

Apple isn’t the only organization touting mobile pay capabilities and devices. Cell phone providers offer tools that work with smart phones to read credit cards. PayPal and other financial organizations are integrating such tools, and numerous cloud and app providers offer free or low-cost mobile pay solutions. Tech organizations are partnering with large retailers or small business organizations to provide solutions in what is quickly becoming a crowded and competitive market. For example, Klarna, a mobile and online payment company from Sweden, is partnering with Overstock.com, a major online retailer, to provide new payment solutions for U.S. shoppers. Those solutions compete with well-known favorites such as PayPal.

The growth of competitors in the mobile pay market is good for small and mid-sized businesses. Suddenly, businesses have a dearth of choices, and no one is at the mercy of merchant accounts that often charge large fees for credit and debit transactions. Disruptive services from new providers actually make accounting issues easier for small businesses, because fees are small and easy to calculate. Some providers simply charge a small percentage on each transaction without requiring any type of commitment from the business.

Businesses Launch Their Own Solutions

Access to cloud and technical services is even encouraging businesses to launch their own mobile payment solutions, cutting out the middleman entirely and saving the transaction fee on every payment. While such strategies are probably not yet viable for the smallest of businesses, former start-up Uber is considering its own mobile wallet in India. Uber sources have identified India as an important market for the crowded taxi industry, and reports indicate that Uber’s biggest competitor in India is also considering its own mobile wallet solution. Access to mobile payment options is important for customers of many business types, but it is critical for a mobile-based service such as Uber.

Mobile payments are just one of the growing disruptive technologies in the business and accounting worlds. These technologies offer enormous benefits to small businesses because they create easier paths to cost-effective management. However, they can also be confusing to understand and implement, which is why small businesses should partner with experts to design technical strategies that do more than jump on a popular bandwagon.