US mobile payments will reach $90-billion by 2017, a 48% compound annual growth rate (CAGR) from the $12,8-billion spent in 2012. 
This is according to Forrester’s latest five-year mobile payments forecast, which segments mobile payments into three categories: in-store mobile payments (proximity payments); mobile commerce (m-commerce); and mobile peer-to-peer (P2P) and remittances.
While all three categories will see healthy growth over the next five years, in-store mobile payments will far outpace the growth of m-commerce (representing 90% of the total mobile payments market in 2012).
By the end of 2017, Forrester forecasts m-commerce to drop from 90% to 50% share, while in-store payments will jump from 4% to 45% share.
“Lower barriers to adoption, increased convenience, and early entrants striving for scale will be important drivers of this growth,” notes Analyst Denée Carrington in a new blog post detailing findings from the forecast.
In a second forecast, Forrester drills down into the growth of retail m-commerce over the next five years, noting:
“While we expect the m-commerce penetration rate to double by 2017, m-commerce in the US is still a tiny portion of e-commerce — and, consequently, a minuscule share of overall retail.”
In fact, notes analyst Sucharita Mulpuru in a new blog post, only 3% of all e-commerce transactions (including daily deals, excluding travel) were completed on mobile devices in 2012, and this number will only reach 9% in 2017.
This week, the National Retail Federation (NRF) held its 102nd Annual Convention and EXPO – Retail’s Big Show 2013. Attendees gathered from around the world to demo products and services and exchange ideas about the future of retail, including mobile payments.
Mobile payments have captured the attention and imagination of industry insiders, venture capital investors, and innovators. Although retailer investment and consumer adoption have been nascent to date, we see that changing. Forrester forecasts that US mobile payments will reach $90-billion in 2017, a 48% compound annual growth rate (CAGR) from the $12,8-billion spent in 2012.
In my new report out today, titled “US Mobile Payments Forecast, 2013 to 2017”, I outline the growth drivers and inhibitors for the three mobile payments categories: mobile proximity, or in-store payments; mobile peer-to-peer (P2P) and remittances; and mobile remote commerce, or m-commerce. Here are the key takeaways:
* Mobile payments adoption will be fuelled by unprecedented growth in proximity payments. Mobile proximity payments are currently the smallest category within mobile payments, but we expect it to be the fastest growing.
Proximity payments will reach $41-billion, making up nearly half of all mobile payments in 2017. Lower barriers to adoption, increased convenience, and early entrants striving for scale will be important drivers of growth.
* Despite growth in P2P payments, mobile remittances will lag behind. There are several types of mobile remittances, including domestic P2P, cross-border P2P, and bill payment. Mobile remittances will exceed $4-billion over the next five years but will fail to achieve the scale of mobile proximity payments or m-commerce.
Mobile P2P will make up more than 90% of the mobile remittance category but will be hampered by its economics. Future growth will be realised in cross-border remittances, which are ripe for disruption, and in the rapidly evolving area of mobile bill pay.
* Consumers adopt mobile payments when it’s clearly better than the next best alternative. Mobile remote payments, or m-commerce, are currently 90% of the mobile payments category and will continue to grow. M-commerce offers a better alternative to shoppers in certain contexts.
The growth of mobile proximity payments, mobile remittances, and mobile remote payments hinges on this reality – each must deliver a better, more convenient option to consumers than the next best payment alternative for a given purchase at a given time.
During Retail’s Big Show 2013, I met with several vendors, including First Data, Ingenico, Isis Mobile Wallet, Marqueta, Natural Security, NCR, PayPal, Q-Thru, Revel Systems, and Wincor Nixdorf.
These companies, and many others, intend to deliver solutions to provide a smarter, more convenient, more secure commerce experience for consumers and merchants. Yet, the reality is that changing consumer behaviour isn’t easy, and merchants have many competing investment priorities.
Mobile payment and digital wallet providers face significant hurdles to achieving adoption at scale, and 2013 will be a pivotal year in that quest. This year will mark the beginning of the end for some mobile payment solutions as competition heightens and expectations for economic outcomes rise.
But those that deliver value, convenience, and a clearly better alternative for both merchants and consumers will thrive as mobile payment adoption accelerates.