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What the mobile payment industry needs to succeed

Oct 18, 2012 Dave King

Mobile payment adoption has skyrocketed in recent years, as more consumers prefer to use their smartphone and tablet devices to complete purchases. Further, retailers are using the associated systems to reach new clientele, and capitalize on the improved cost-effectiveness of the technology. Among the biggest advantages of mobile payments has been the ability to reach the underbanked and unbanked populations, as several studies have shown that these demographics prefer to enter the financial market through this technology. Banks and merchants have increased efforts to reach these individuals, and have been met with much success. Major mobile payment catalysts
The Wiglaf Journal recently explained some of the key factors that are expected to push mobile payment adoption even further in the coming years. According to the news provider, the financial sector will need to ensure security while creating a standard practice that allows for better compatibility between different systems, especially because of the large variety of devices and software currently on the market. The source noted that the industry is being shaped by a growing number of smaller payment processing firms that develop more affordable and intuitive solutions. Further, the wide breadth of mobile device manufacturers that continue to develop and release new products is increasing competition, thus improving the options merchants and consumers have. The Journal cited the rapid growth of smartphone adoption as a major driver of mobile payments, as just under 50 percent of the nation's consumers now own these devices. Though the source suggested that merchants and service providers will need to further influence consumer shopping behaviors, many reports have revealed that these sentiments are changing irrevocably toward mobile preference. Reaching the underbanked
Mobile payments have been viewed as a viable method of driving down the population of unbanked and underbanked individuals in the United States. According to a 2011 Federal Deposit Insurance Corporation study, more than 8 percent of all U.S. households are considered unbanked, while 20.1 percent are underbanked. Further, the survey revealed that 25 percent of all households used at least one alternative financial service product in the last year, while roughly 10 percent have used two or more in that same time period. This represents millions of individuals, all of which can be better reached through mobile and online banking and payment capabilities. Many analysts have shown that alternative financial services can be the boost underbanked individuals need to enter the banking world.