The deep dive: Mobile payment market

By Puja Sharma

The deep dive’ is our bi-weekly exploration of a relevant topic, hot trend, or new product. For Prime subscribers only.

How does it work?

Mobile payments are automated payments made using smartphone devices that are financially supervised by regulatory bodies. They are a type of electronic payment that uses mobile devices for approval, starting, and validating financial transactions. These methods entail using a mobile application that is connected to the user’s financial information. Point-of-sale (POS) terminals and nearfield communications facilitate money exchange.

Customers can pay with greater security due to mobile POS systems because they don’t store user data on the merchant’s POS device. The hassle of handling traditional payment methods, such as cash and cheques, has been reduced by the use of mobile payments. Users now have greater convenience and data protection owing to these automated systems. They are therefore widely used in many different operational segments across many different end-use businesses, such as food service, retail, and entertainment.

The new study from Juniper Research, the foremost expert in the payments market, found that the total value of mobile money transactions in emerging markets will reach $2 trillion by 2027, an increase of over $500 billion from 2023.

Growing at 33%, the market is being driven by the transition to PaaP (Payments-as-a-Platform), a model which allows third parties to deliver products via mobile money apps. PaaP enables third parties to have more access to users, without mobile money operators having to develop additional services themselves. This also enables greater revenue for mobile money operators, whilst allowing them to meet increasingly sophisticated user demands.

Who is under the radar?

Maturity of mobile money markets leading to increased sophisticated MFS usage

The research predicted that by 2027, there will be 411 million users of sophisticated MFS (Mobile Financial Services) within emerging markets. This 40% increase is a result of providers offering a variety of services, such as microloans and microinsurance, to satisfy growing user demand. The rising maturity of several mobile money markets, growing customer awareness, and affluence of users have increased the importance of mobile money vendors providing sophisticated MFS; investing in technologies that facilitate it.

According to the research co-author Cara Malone, “Vendors must effectively implement sophisticated MFS, or they will lose ground to rising competition. This can be best achieved through new approaches, such as leveraging existing data that operators hold to enable alternative credit scoring, allowing much greater lending opportunities.”

Customer support is crucial as service evolves to sophisticated MFS

Mobile money vendors must leverage data analytics to best retain customers and fight off rising competition. By gaining valuable insight into consumer behavior and preferences, vendors can provide better-tailored services to end users. Combining this data with new third-party services via PaaP enables a more personalised service; increasing customer satisfaction and revenue.

Why does it matter now?

Increasing smartphone adoption and improved network infrastructure around the world are driving the mobile payment industry. Since high-speed internet connectivity is widely available, a variety of retail establishments can offer customers mobile-based payment options.

The Asia Pacific is expected to hold the largest revenue share in the global mobile payment market over the forecast period. The main reason fueling the rapid expansion of the mobile payment market in this region is the rising adoption of smart appliances like smartphones. Additionally, the expansion of the mobile payment industry in this region is being supported by growing government initiatives as well as growing initiatives from mobile companies offering fast internet service.

The government of India, for instance, has a program called ” Digital India” that aims to connect rural areas to high-speed internet networks. Vietnam has the mobile payments market’s highest growth rate in the Asia-Pacific region. With about 86 percent of its people using mobile payments, China takes the lead. Thailand follows with about 67%.