While mobile payment apps come by many names and in many varieties, their core attributes are often similar. Simply put, they allow users to pay electronically either via the transfer of money from one user’s account to another’s or by placing one’s phone near an enabled payment device.
The growth of these apps has been driven in large part by the ease of use. They allow users to easily transfer money to friends, family, and businesses, an offering that is only more attractive amid a national coin shortage.
Some of the most popular mobile payment applications are Venmo, Cash App, Apple Pay, Google Pay, and PayPal — which have contributed to a nearly $100 billion industry. In fact, between 2018 and 2019, the mobile payment app market grew by almost $30 billion. In a country where nearly 70% of adults own a smartphone, the usage of these apps will only continue to increase.
However, this growth has not been without setbacks. According to Julie Bernard of the IAB Data Center of Excellence, an unforeseen obstacle of mobile payments is consumers not being used to having their phone in hand at the checkout line.
“As with the adoption of any new technology, we need to solve a consumer problem,” she said. “...In the early years, for many consumers, the act of taking out their credit card and inserting it simply wasn’t a pain point. While many assumed the phone would be in-hand at point of sale, oftentimes it wasn’t; the items that the consumer was purchasing were in-hand so the act of taking out a plastic card or phone was no different in terms of checkout speed and ease.”
During the COVID-19 pandemic, however, this attitude may be changing. In April, Bloomberg reported that mobile payments, “a onetime niche technology, is roaring into the mainstream” as a result of consumer concern over the risk of germ transfer.
In April, a survey conducted by Electran found that 27% of small business owners had already seen an increase in mobile payments.
Jordan McKee, who analyzes consumer behavior at 451 Research, said that the use of these technologies would continue after the pandemic is over.
“It’s behavior that’s going to stick after stay at home ends,” she said. “There will be muscle memory about paying, and consumers will use it going around their daily life.”
Which App Is Winning?
While it is difficult to say which mobile payment app is winning the race to accommodate these new circumstances, Apple’s in-house payment service Apple Pay is perhaps the most commonly used.
According to Statista, Apple Pay has a global user base of about 441 million users, and almost half of iPhone users have enabled the service, allowing them to easily send money via iMessage to other iPhone users and pay via Apple Pay-enabled payment kiosks.
However, Apple Pay has so far been unable to rival the online ubiquity of PayPal. The online payment service, established at the dawn of the digital age in 1998, is used heavily on leading websites such as eBay. Additionally, PayPal’s 2013 purchase of Venmo signals a powerhouse move into the world of mobile cash transactions.
“Venmo processed $29 billion in volume for the quarter, growing 56%,” PayPal CEO Dan Schulman told Forbes earlier this year. “And for the year, volume increased to $102 billion.”
He said that the company hopes to move into alternate uses for the technology in an effort to increase usership, including Venmo payouts (e.g., for rebates and rewards).
“Last year, we saw brands like Netflix, Pepsi and Chipotle use Venmo payouts to reward their customers and pay them via Venmo. We are excited to introduce new monetizable value-added services to our Venmo platform over the course of 2020,” said Schulman.
The Future of Mobile Payments
The growth of mobile payment apps indicate continued usage in the United States, and several factors make their widespread use seemingly inevitable.
Firstly, the coronavirus’s impact on daily life worldwide is making consumers more cautious about the potential health risks associated with coming into contact with commonly touched surfaces in public.
Secondly, the ease-of-use offered by such apps is attractive to consumers, who often want to send money to friends and family in exact amounts instantly.
Thirdly, the number of Americans who do not own a smartphone is rapidly decreasing. Smartphones have become widespread in the years since their invention, and they are not likely to disappear.
Because of these factors, mobile payment systems are becoming an increasingly integral part of American society, and businesses that do not accommodate their use are neglecting a crucial payment method that is unlikely to go away.