A decade ago, on May 26, 2011, mobile payments at the point of sale became a reality with the launch of Google Wallet. As the name implies, it was a way to store payment cards (and other cards) in your phone and access them without digging into your regular wallet. Though it was embraced by techies, Google Wallet never enjoyed mainstream adoption at the time. It retreated to card from before being absorbed into Android Pay, now Google Pay.
The field is littered with extinct mobile payments services. MCX, with its never-launched payment system CurrentC, was operated by a consortium of merchants led by Walmart to use QR codes and ACH to make an end-run around credit card processing fees. The company launched in 2012 and in 2017 its technology was bought by Chase for Chase Pay, which shut down in 2020 after failing to win over retailers.
Another notable also-ran was the ill-fated Isis, renamed Softcard, which was put together by the telecommunications companies Verizon, AT&T, and T-Mobile. Built on near-field communication (NFC) technology, later used by Apple Pay, Softcard launched in 2013, failed to gain traction, and was bought in 2015 by Google, whose Wallet was already backed by Softcard rivals Sprint and MetroPCS. Google Wallet and Softcard combined to become Android Pay, now known as Google Pay or G Pay. (Yes, it’s confusing.)
Samsung Pay was built on technology developed for Loop, an innovative mobile payment system that used magnetic communication with magswipe card readers, even readers that did not accept EMV or chip cards.
And who can forget Clinkle? The startup brought in $30 million in what was at the time a mega-funding round for fintech, though of course it is a rounding error compared with today’s raises. Clinkle’s “aerolink” was supposed to use an ultrasound system to communicate with point-of-sale devices.
Apple Pay, Samsung Pay, and Google Pay emerged as winners in the mobile payment wars, but volume was small. Apple Pay didn’t surpass Starbucks in annual payment volume until 2019. Users lacked a real reason to pay with their phones when card swipes, or rather dips, were so convenient, and mobile, outside of Starbucks and few other retailer-specific services, failed to offer compelling rewards.
But the Covid-19 pandemic changed all that. Consumers were now prioritizing contactless payments as people were less than enthusiastic about paying with cash and/or wiping down their cards with hand sanitizer. Merchants were suddenly encouraging users to use contactless methods, which mobile offered. 69% of retailers saw an increase in contactless payments during the pandemic, and 94% expect that increase to continue over the next 18 months. In-store or proximity mobile payments grew 29% in 2020 as mobile became the preferred method for the times.
More than 92 million Americans made at least one mobile payment during a six-month period in 2020, according to the market research firm eMarketer. The average mobile payments user will spend $1,670 in 2021, according to data from Retail Dive, while eMarketer predicts $2,439.
Still, gains have just fallen short of the projections of five years ago. In 2016 it was predicted that in-store mobile payments in the U.S. would top $503 billion. The actual number, even with the pandemic, was $465.1 billion. Globally, the figure is $2.4 trillion, with China leading the way.
Of course, the pandemic cut both ways. Fewer people were out shopping in stores, but those that were, increasingly used mobile devices. In a new report, eMarketer projects that 50.1% of smartphone users will have made an in-store purchase by 2025. This may sound modest for the US market who have been slow to adopt, but it’s over half of all smartphone users and highlights a larger shift in behavior that will shape the future of how we pay moving forward.