Recent innovations in the payments industry have extended across the globe. New transaction models continue to emerge, and traditional payment methods — like credit cards, checks and cash — are being joined by a generation of mobile-friendly methods.
Smart Business spoke with Thomas C. Engler, vice president of the Western Pennsylvania Middle Market at Chase Commercial Banking, about how to make this transformation work for your business.
What are some recent developments driving this expanding mobile payments environment?
Global demographics are playing a big part in accelerating the growth of mobile. Millennials, many of who hold midlevel positions in the workforce, have been at the forefront of mobile for over a decade now. This group of tech-savvy professionals — which will only continue to grow as boomers retire — is far more likely to abandon cash payments in favor of mobile transactions than previous generations. And it’s a likely assumption that over the next five to 10 years, mobile may become the norm, so getting into the market early could have distinct advantages for your company.
Another reason mobile payments are skyrocketing is the increase in consumers, both tech-savvy millennials and emerging-market professionals, who have no formal, established banking relationships but who do have phones.
This appetite for mobile payments, as well as increasing global buying preferences, may also lead to further opportunities for high-margin payments products for companies who get on board with early adopters of mobile payment platforms.
Regulatory and industry initiatives also play a role in transforming the mobile payments space. What are a few you think businesses should be aware of?
One of the key market-transformation trends is risk reduction. Basel III is a great example of this. It monitors individual bank health and coordinates with the interlinked network of international banks to act quickly and decisively when individual or systematic weaknesses come to light. Further, capital rules for foreign banks in the U.S. — as well as regulations on virtual currency, bank payment obligations, European mobile and Internet payment security initiatives and the U.S. Foreign Account Tax Compliance Act — all work to reduce risk throughout the global mobile industry.
Standardization is another trend. A lack of industry agreement on how to best implement the system, and a marketplace riddled with different technology types and business models have made regulation a challenge. Now though, global initiatives, including cybersecurity and data privacy directives, as well as access to clearing regulations, are helping to drive standardization.
Along with standardization, competition and transparency continue to be key transformation trends in mobile. Regulations and initiatives in this area include Prepaid Payment Products Regulations in North America, payments governance and pressure on card interchange fees.
And as the market share for mobile grows, innovation continues to lie at the industry’s heart. Key initiatives and regulations include the UAE’s Mobile Wallet and the EU’s updated Payment Services Directive, e-Invoicing, e-Government and Current Account Switch service.
What’s the ultimate takeaway for businesses? How should they prepare for this mobile-centric payments future?
While mobile is called the ‘payment model of the future,’ really, the future is already here.
This is great news for those who are considering — or already utilizing — mobile payment solutions for clients and vendors, because mobile is a high-margin payment process that offers a great return.
Contactless transactions take less time than cash payments, and the average customer also spends more on mobile as well, which means there is more time and opportunity for transactions to take place.
For multinational companies doing business in these markets, it’s clear that mobile is the key to future growth and additional market share.
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