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IPhone biggest driver by far of in-store mobile payments: report

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May 8, 2015

IPhones are leading mobile proximity payments

IPhones are leading mobile proximity payments

IPhone owners are much more likely than Android smartphone owners to have made a purchase in-store at the checkout counter using their mobile phone within a 30-day period, according to a new report from Javelin Strategy & Research.

The report, Mobile Proximity Payments Forecast 2015, focuses on the market for payments made at the physical point-of-sale using a mobile device. This market is currently very small but is expected to take off in the next few years thanks to several developments, including retailers converting to contactless terminals and consumers becoming comfortable with making mobile payments.

“I think proximity payments will continue to accelerate in 2015, and really start to move in 2016,” said Drew Sievers, founding partner at fintech investor Operative Capital. “While the percentage relative to traditional payments will be small, the pace of growth will be the fastest we’ve seen.

‘When the iPhone 6 came out with payments, I made maybe one proximity payment per week since POS acceptance,” he said. “Last weekend, 80 percent of my purchases in retail were via the phone, since POS penetration is changing much faster than I’d anticipated.”

Mr. Sievers is not affiliated with Javelin Strategy & Research and commented based on his experience in mobile payments.

Javelin did not respond to a request for comment by the press deadline.

Exponential growth
In 2015, mobile proximity payments account for a mere 1 percent of all retail transactions. However, Javelin believes that potential for growth and acceleration is exponential. As a result, by 2019, Javelin forecasts mobile proximity payments to reach $54 billion.

IPhone users dominate the first adopters of mobile payments.

Almost one in six iOS smartphone owners made a proximity purchase within a 30-day period, nearly double the rate of Android smartphone owners, according to Javelin.

Screen Shot 2015-05-07 at 1.18.57 PM

These findings follows the release of Apple Pay last fall, which promises a seamless in-store payment experience and has been adopted by a number of retailers already.

IPhone users are also making slightly bigger purchases on mobile, with the media purchase price paid by iPhone owners coming in at $20 compared to $15 for Android owners.

POS acceptance
The findings point to how the power has shifted to consumers with smartphones, putting the burden on vendors to adopt and respond in new ways, according to Javelin. For example, merchants can use their own apps to offset competitors’ shopping apps by deploying targeted rewards, discounts and loyalty points.

Several factors are likely to support a ramp up for mobile proximity payments, including the transition to contactless terminals taking place at a growing number of merchants.

Apple Pay 400 3

Merchants, financial organizations and software companies are also looking to pair payments with value-add offerings that will make the switch over more appealing, such as loyalty rewards, exclusive offers and other shopping enhancements.

However, merchants are struggling with getting their in-store associates up to speed on the new offerings, which is hampering adoption (see story).

At the same, newer mobile phones often have NFC technology embedded in them and consumers are increasingly becoming comfortable with the idea of paying with their phones.

“POS acceptance will be key to driving full scale adoption of proximity payments,” Mr. Sievers said. “Until a consumer sees 50 percent or more of the points of sale accepting proximity, it’s still a novelty.

“Once penetration breaks 50 percent, that will be the tipping point,” he said. “I don’t see that happening for a few more years.”

Final Take
Chantal Tode is senior editor on Mobile Commerce Daily, New York

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