The growing trend in purchasing today is a concept called contactless or frictionless payments. These are payment opportunities provided by businesses that use devices and apps, or even websites to help you make purchases naturally without having to enter your credit card information continually. Many companies, such as Apple, Starbucks, PayPal, and many others are offering this credit card functionality through their own products and services
Frictionless payments are not just for online purchases. A rapidly growing number of retailers are opting to take these payments as well. You may have seen them in the checkout lines doing your holiday shopping – signs on the credit card machine that say “Apple Pay.” McDonald’s has even incorporated Apple Pay into their own mobile payment options.
What Is Their Current Reach?
Frictionless payments, like Apple Pay, still only hold a margin of the total payments made in the United States. What is slowing the growth? Three significant factors are slowing the growth of frictionless payments like Apple Pay.
The first is bank regulations. Many banks have a limit on how much can be spent through mobile devices or applications. Just as credit cards have spending limits, you can expect frictionless payment opportunities to carry similar restrictions on those same devices and apps. These regulations limit purchases to smaller amounts and only a select number of locations.
Availability is the second limiting factor here. Major retail stores are able to implement frictionless payment methods with more convenience and efficiency than other businesses, such as gas stations, which have to update all of their pumps with new technology to facilitate these types of payment. For these businesses, their choice of multi-payment options comes down to a cost/benefit ratio, and for the moment, it costs more than they would gain since they typically accept credit and debit cards already.
The third growth-slowing factor is security. Technology security, especially around money, is always struggling to keep up with fraud and theft potential, and these payment opportunities are still new enough to make them vulnerable to data theft and the consequential money theft and fraud. This is not stopping the younger generations though, who prefer convenience over security and who are willing to take risks with their purchasing practices that older generations do not.
Where Are They Going?
These hold ups are not stopping Apple. They are on the rise, and many economists are predicting that they will accelerate to up to one-third of digital payments within three years. That would add up to approximately $262 billion. By the end of 2018 Apple expects to be in up to 60% of retailers. They are big enough already that many credit card companies are complaining that Apple has moved into their territory. So far, Apple claims it is merely a tactic to push the sale of their devices.
How do we know that growth is around the corner for frictionless payment? Because it has already taken over the rest of the world. Apple Wallet can be used in 24 countries, and iPhones are being used to transact payment for public transit in 12 major cities such as Shanghai, Beijing, Tokyo, London, and Moscow. These nations are outpacing the US in frictionless payment adoption, with Apple leading the way.