Smartphones are changing payments globally and they’re doing it now

It is no surprise that mobile payments have taken off. Technology has always had a quick uptake in developed markets. However, all markets are taking up smartphones with aplomb and this is rapidly changing the payments sector. Patrick Brusnahan reports

Smartphones are everywhere. According to Newzoo’s Global Mobile Market Report, there are 226 million smartphone users in the US. Compared to the population, this is a penetration rate of 69.3%. Canada is similar with 25.5 million smartphone users and a 69.8% penetration rate. The UK is not far behind with a 68.6% penetration rate.

However, the leader of the pack is the UAE with a smartphone penetration rate of 80.6% and 7.5 million smartphone users in the country.

A number of mobile wallets and m-payment solutions have been present in the UAE for a number of years. These players include Beam Wallet, Etisalat Wallet and NDB Pay.

Following their launch in markets such as the US and the UK, Samsung Pay and Apply Pay landed on the UAE’s shores in 2017. The iron is hot and it’s time to strike.

A consortium of 16 banks in the UAE is working on launching the Emirates Digital Wallet (EDW) to compete. This solution offers a multitude of options, such as mPOS payments and m-PSP bank payments.

According to GlobalData, smartphones represented 77% of total handset subscriptions in 2016 in the UAE.

Mobile wallets are gaining traction in 2017 as 19.5% of the UAE population have a mobile wallet and do use it. This is two percentage points than in 2015. Additionally, GlobalData estimates that payment card penetration already hit 155% of the UAE population in the same year.

GlobalData analyst Houda Bostanji says: “This reflects the existing appetite and friendly environment for electronic payments, which m-payment players in the country can capitalise on.”

Furthermore, there is a clear and dedicated regulatory framework conducive to m-payments development in the UAE. The Central Bank of the UAE issued in 2017 a licensing procedure for all digital payment service providers, defining four distinct types of digital payment service provider (PSP) licenses – retail PSP, micropayments PSP, government PSP and non-issuing PSP.

The Middle East, overall, is witnessing a burgeoning m-payments market with a number of players offering a multitude of m-payment services.

In Kuwait, for instance, One Pay and Quickpay enable customers to pay for their bills (including rent, pay-TV subscriptions, school fees and international payments) from a dedicated mobile app.

Furthermore, the National Bank of Kuwait made its contactless payment service NBK Tap & Pay available this year on customers’ wristbands.

Moreover, Kuwait Finance House launched its KFH Wallet in 2017 enabling users to perform mobile payments at merchants’ NFC (Near-Field Communication) POS terminals in the country.

According to GlobalData, mobile revenue will account for 86.3% of the total telecom revenue in 2021; mobile data will witness a CAGR of 8.4% during 2016-2021.

Saudi Arabia scored 37.5 in the Mastercard Mobile Payments Readiness Index in 2015, higher than the world average of 33.2. This indicates that the country is ready and willing for mobile solutions.

So far, the nation has a PayPal smartphone offering, Payfort, Boku, T-Pay and M-Pesa in circulation. There is the mobile penetration there for these to succeed as it lies at 65.2% according to Newzoo.

Iran’s consumer interest in alternative payments is also rising. The country has 30 million smartphone users and a penetration rate of 37.1%.

The latest addition to its alternative payments sector is the Sekeh mobile wallet by Behpardakht Mellat. It allows customers to make contactless payments at POS terminals and also supports payments by scanning QR codes.

Other mobile wallets in the region include ZarinPal, Jiring, and PayPing.

 While payments are one aspect of smartphones’ impact on the financial sector, it has also boosted mobile banking.

GlobalData’s research has revealed that, across the world, 87% of mobile banking users are satisfied with their mobile banking app being able to do what they need it to do.

 Across the globe, the use of mobile banking has grown at a modest pace. According to GlobalData, the proportion of consumers who use this channel on a daily or weekly basis rose from 35% in 2016 to 39% in 2017.

On the other hand, the average rise does not tell the whole story as there are significant differences between markets.

The global average rise of mobile banking usage (daily or weekly) was 4%. A fair number of countries beat this standard.

The Nordics performed particularly well. Sweden rose by 13%, Norway rose by 14%, and Denmark rose by 5%.

In addition, Russia’s mobile banking usage also rose by 14%. The largest number of people regularly using mobile banking was in Turkey at 63%, a rise of 12 percentage points from 2016.

In general, mobile banking usage is highest in developing markets. The lack of physical banking infrastructure plays a critical role in adoption as consumers are left to become well-versed in digital options.

Nordic markets have seen concentrated efforts from governments, banks, and retailers to push consumers away from cash to card and mobile payments. As a result, mobile banking has seen uplift.

Usage in advanced markets such as the US, Spain, Singapore, France, and Germany has barely changed over the last 12 months.

On the other hand, some countries’ usage has actually dropped. Malaysia’s mobile banking usage dropped by 9 percentage points, from 38% to 29%.

Indonesia dropped from 48% in 2016 to 44% in 2017 and both Singapore and Italy suffered similar falls.