The Future of Mobile Payment Apps in the United States

By Sam Pandey on The Capital

When looking at history, we often find that innovation in technology occurs at a reactionary pace rather than at a pre-emptive pace. The shifts in technology adoption do not usually come from pre-emption but rather reactionary innovation. We only really hear and use technologies in the long-run that make it through trial-and-error with a significant margin of success and not a continued error. This, in fact, is the case with the growth of digital currency in the United States. Technology adoption has not drastically increased but instead started to grow at a very slow pace with regulations, security, and powerful banks still limiting the growth significantly.

In the case of the COVID-19 pandemic, the evolution of digital currency adoption could not have come at a more critical moment in time. Mobile applications that allow for contactless transactions (without paper currency) are now becoming more relevant than ever across the globe. Mobile transaction adoption has historically been based in Asia, particularly in China, but not on a larger scale in the United States. The preference for retail transactions in the United States still lies with credit and debit cards issued by banks. This preference is partially industry-driven and consumer-driven with consumer preferences being mainly age driven. Millennials and young professionals are starting to use apps in urban areas. While middle-aged to elderly users stick to paper currency and credit cards. Industry drivers also contribute to the continued use of credit cards as banks incentivize new cards with sign-on bonuses and reward systems.

The question we currently face is whether or not the United States will see a spike in mobile payment application users during this pandemic?

Historically, China by far has the largest number of mobile users in the world. With a staggering 890 million users[1] currently making payments on mobile devices through Alibaba’sAliPay,” and Tencent’sWeChat,” China’s slow migration away from paper currency continues to grow. More Chinese merchants are starting to use these applications to complete daily transactions for staple goods and services. The appeal for using mobile payment devices by retailers in China is that payment transactions are being generated through the use of QR codes generated through the mobile apps that are making print currency obsolete. All a user needs to do is simply point their phone at a print of the QR code and approve the payment.

With the rise of these applications in China, how can we measure the growth in the United States?

In order to better understand the big picture of digital transaction services offered, we need to consider that digital currency applications are broken up into different categories of services. Digital wallets are built to allow accessibility via desktop and laptop and allow for quick transactions through your physical phone at brick and mortar vendors and online retailers. Payments can also be made online and transactions are primarily made through business-to-business channels through applications such as Apple Pay, Samsung Pay, and Android Pay.

We can expect massive growth of digital wallet users in the coming years primarily fueled by the growth of Apple Pay. Researchers from Bernstein concluded that “Apple Pay will account for a 52% share of OEM pay transaction values in 2026, up from 43% in 2020. The expansion of Apple Pay’s user base in key regions, including the Far East, China, and Europe will drive growth as well as the extension of Apple’s reach outside OEM Pay through its Apple Card initiative.” Additionally, Apple Pay’s proprietary NFC technology allows for it to continue having a market lead in the digital wallet space despite the gains that PayPal tries to make in the space. Despite these two key growth proponents, the pandemic will prompt retailers to still consider paperless solutions with the least amount of actual contact.

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