Remain Calm: Mobile Pay Will Boom, but It Doesn’t Warrant a Media Frenzy, Analyst Says

Mobile-payments volume will nearly triple from $51.5 billion this year to $141.7 billion in 2019, according to a new report from Forrester Research Inc. That’s pretty exciting news for payments networks, processors, banks, tech specialists, and others with a stake in the budding sector.

But wait. Even with all that growth, mobile payments will still account for only about 1% of $16 trillion in estimated consumer spending on goods and services, according to the report by analyst Denee Carrington. She suggests that people not be swayed by overblown predictions that radical change in payment behavior is imminent.

“The media frenzy around mobile payments—most recently Apple Pay—has reached fever pitch and led some industry spectators to conclude that a payments revolution is at hand,” Carrington says in the report. “Not so. The adoption of mobile payments is an evolution—not a revolution—and the evolution is well under way.”

This evolution is most pronounced at the point of sale. What Carrington calls in-person payments with mobile devices will total $3.74 billion and account for just over 7% of all mobile spending this year, the least of the three mobile-pay categories she identifies. The other two are remote payments—the mobile version of e-commerce—and peer-to-peer transfers. By 2019, Cambridge, Mass.-based Forrester predicts in-store payments will hit $34.2 billion as a result of its 56% compounded annual growth rate (CAGR) and account for 24% of all mobile payments.

Carrington, who was not available for in an interview, says in the report that in-store mobile payments have been “marked by tremendous investment and experimentation.” She notes that coffee and tea purveyor Starbucks Corp. “is the leading example of marketplace success,” with 16% of its U.S. transactions, 7 million a week, now coming through mobile devices.

Few other merchants have replicated Starbucks’s success, however. “On the consumer side, broad-scale adoption has been stymied by inertia and apathy toward most mobile-payment solutions,” Carrington says. Some 19% of U.S. online adults with a mobile phone or tablet are interested in using in-person payments, but few have given it a try because of “the lack of broad-based merchant adoption,” she says, citing other Forrester research.

Merchants wanting to reduce the “embedded friction” of traditional in-store payments, such as ordering or waiting in line, will lead the POS mobile-payments charge, according to Carrington. Most are high-volume merchants such as grocery stores and quick-service restaurants, but they also include sit-down restaurants.

The coming of Europay-MasterCard-Visa (EMV) chip cards will add even more friction to the traditional credit and debit card payment process and therefore could enhance the appeal of POS mobile payments. “As both merchants and consumers sort out the coming upheaval with card payments and are forced to adopt new payment behaviors, many will see mobile payments as a more simple and straightforward choice that is equally as—or even more—secure,” the report says.

Meanwhile, Forrester predicts remote mobile payments will increase from $42.6 billion this year to $90.7 billion by 2019 for a CAGR of 16%. Remote payments will still lead among the three sub-groups of mobile payments, but their share will decline from 83% currently to 64%.

Peer-to-peer transfers using mobile devices will total $5.26 billion this year and grow at a 26% CAGR to $16.8 billion in 2019, Forrester says. Their share of mobile payments will increase slightly, from 10% currently to 12%.

Forrester interviewed a dozen companies for its report, including PayPal, Visa, Dunkin’ Donuts, JPMorgan Chase, and Level Up.