The year 2015 may just be the year the payments and commerce industry sets the tone for years to come. There were a lot of things that happened in 2014 that certainly set the stage for a big and important year. And, where there’s big expectations, there’s lots of speculation on everything from Apple Pay to Amazon to the state of banking to small business sentiment to PayPal’s prospects as a solo company.
Here’s a quick look at some of who’s gone “on the record” about what’s to come in 2015.
Apple and Apple Pay will lead mobile payments discussions through 2015
Apple will energize the mobile payments market, Forester reported, and suggested the company "is poised to drive the smartwatch market and, once again, catalyze a new category of products and experiences.” Forrester estimates that roughly 15 million adults will buy an Apple Watch (7 percent of online adults). Forrester also predicts the "U.S. mobile payments will expand from $52 billion in 2014 to $142 billion by 2019." 2015 will be a major catalyst in that growth. That prediction has already been busted by a new report that said less than 5 percent of all Apple customers will make a purchase, which is a far cry from 7 percent of all online adults.
Not all analysts agree that 2015 will be the year of Apple Pay, though.
"Apple Pay is a multiyear thing. I don't think 2015 is the year Apple Pay becomes huge. I think it will take a few years," said Bob O'Donnell, founder and chief analyst of TECHnalysis Research.
And he's not alone. Jan Dawson, chief analyst at Jackdaw Research, said what Apple really needs first is more retailer adoption before it becomes a standard way to pay. Credit card adoption is also key, he said, but as of a few weeks ago, it was reported that Apple Pay now supports 90 percent of all issuer credit cards.
"My take on Apple Pay is it is going to be a slow-burn success," Dawson said. "In the next few years all of these elements will work their way through, so the time will come, but the question is what will Apple do to accelerate it in the meantime to speed up that evolution and adoption."
Consumers will still prefer to pay with plastic, not mobile
The mainstream media isn't ready to jump on the mobile payments trend quite yet. There's a lot of hype, but there's also plenty of cautious consumers who aren't on the bandwagon. 2014 showed mobile payments have gotten a new jolt from all of the media attention focused on it thanks to Apple Pay — but many still don’t think that’s enough to move the mobile payments needle.
"Things move at a glacier’s pace when it comes to money," GeekWire reported Jan. 2. "For instance, only 2 percent of U.S. retailers have point-of-sale systems that are NFC-enabled, and there’s around 9 million retailers in the country. Many customers have not even used Apple Pay, Softcard or Google Wallet." This is, of course, consistent with what we’ve reported on PYMNTS about why Apple Pay faces some tough ignition headwinds.
But, overall, consumers may be softening. The NRF reported right before the holiday season that more than 25 percent of smartphone and tablet consumers felt comfortable using their phones to pay for merchandise in stores. And, of course online, sales are growing. E-commerce as a percentage of all retail sales has inched up to 7 percent of all retail, with some categories experiencing large portions of their sales online.
That said, plastic cards and cash are accepted at most of the places that people like to shop — a huge hurdle for any mobile payments innovation to overcome.
Security budgets will increase, but so will breaches in the payments marketplace throughout 2015
With all the data breaches of 2014, security will surely be at the forefront in the payments industry. Payment companies vowed in 2014 that they would invest heavily in security measures, and Forrester predicts they will, but the analyst group also anticipates most companies still won't be prepared for those breaches.
“In 2015, there will be large increases in security budgets, with double-digit growth in some sectors… [but] more security budget doesn’t guarantee better security or even increased security maturity… A large majority of companies will discover a breach but botch the response," Forrester reported.
Despite the heightened attention toward security in 2014, there will still be a significant lack of response to breaches, Forrester said, reporting that "60 percent of enterprises will discover a breach in 2015 but only 21 percent of enterprises report that improving incident response is a critical priority."
Consumer confidence and spending will continue to rise
Each year since recovery from the 2008 financial crisis has given a new boost to consumer spending and put confidence back in shoppers' pocketbooks that it's time to spend again. After all, you can't confidently project an increase in payments volumes if consumers aren't willing to spend. The 2015 spending forecast paints an optimistic outlook for retail.
According to Moody's Analytics, the nation's GDP is expected to increase at a 3.5 percent rate -- a percentage higher than the economy's average growth rate of 2.5 percent -- in 2015. If those projections play out, it should mean consumers will be willing to spend more.
“We are upbeat,” said Scott Hoyt, senior director of consumer economics for Moody’s Analytics. “It looks like the economy is starting to accelerate, and we expect that trend to be maintained.”
Hoyt said core retail sales are expected to increase 6 percent in 2015, which is up from the anticipated rate of 3.9 percent that was projected for 2014. With consumer confidence on the rise, employment rates increasing and more money in consumers' accounts, the uptick in retail sales should translate into retail confidence as well, one analyst says.
“Businesses are showing a new willingness to expand as opposed to three or five years ago when they were afraid banks might unexpectedly call in their loans,” said Walter Simson, principal of Ventor Consulting. “Retailers, for their part, are fairly busy. They are hiring more people and increasing hours. I see a continuation of these trends.”
The U.S. economy will grow for the first time in a decade
Economic growth means more spending and more money to invest in innovations in the payments and commerce industries. 2015 is projected to be the year that sets the U.S. up for economic growth.
“The next two years could be the best two we have seen in at least a decade,” said Bernard Baumohl, chief global economist of the Economic Outlook Group. “There is clearly a lot of evidence the economy is gaining a lot of momentum.”
Small businesses will invest in data and mobile technologies in 2015
Technology innovation needs retailer adoption as much as retailers need technology innovation. A synergy between the two and consumers could be a key player for small businesses to have an edge with its customer base. Keeping relevant in times of rapid innovation could be the difference for small business owners in 2015.
"I believe technology will have the most impact on small businesses. 2015 will be the year of EMV chip and PIN cards and Apple Pay," said Jim Salmon, vice president of business services at Navy Federal Credit Union. "Small business owners will be faced with the decision of whether to upgrade their payments equipment or wait until it's more widely adopted. Small business owners should communicate with their customers to gauge what forms of payments they will use and plan their timing accordingly."
2015 is also anticipated to bring about big growth for the small business industry, as "according to the CAN Capital Small Business Health Index, 58 percent of small business owners expect growth in 2015."
Forbes recently released a list of "6 small business trends to watch out for in 2015" and this list included what others in the industry having been saying about a shift in focus toward big data. Technology adoption is key, and small businesses are seeing the value of its investment. In a recent IBM Business Tech Trends Study, it was reported that 75 percent of small businesses said they planned to invest more in big data analytics.
“The pace setters will adopt new tools that allow them to quickly and easily sift through their data,” IBM’s Midmarket GM John Mason said. “The magic will be that these powerful new tools that small businesses adopt are no longer expensive solutions designed purely for data scientists and specialized analysts, but can be used by any employee."
Mobile was big in 2014, but the year wrapped up with plenty of questions about what 2015 could bring. More consumers are turning to mobile to shop and more retailers understand the power of mobile in harnessing customers and sales. Major retailers have begun their investments in mobile, but small businesses shouldn't overlook the opportunities that mobile can deliver for them this year.
"Mobile commerce and mobile usage will continue to increase," said Chris Belew, CEO of Apptive, a mobile commerce app company. "SMBs will start to create a more mobile-integrated marketing plan to engage customers and compete in the mobile realm. Merchants will start to pay more attention to mobile analytics, and create separate goals and objectives for their mobile efforts."
2015 banking trends will move toward mobile adoption and richer customer experiences
With more innovation taking place in the alternative lending space, it begs the question as to where the more traditional financial institutions will focus their efforts. Pundits predict that since banks have realized the importance of engaging customers through technology innovation and consumer-focused experiences, that 2015 will be a year in which banks invest more heavily in those areas.
"In 2015, banks and credit unions will leverage richer analytics-driven insights to enable a more personalized approach to targeting and engaging with consumers," according to analysis from The Financial Brand. "From location-based offers to improved service delivery, organizations will use spending patterns, product use and channel interactions to enable improved experience-driven banking."
Technology investments for banks in 2015 are also predicted to be a trend as Forrester Research reported that online video for both sales and service will increase, which could include video tellers to help consumers through remote touchpoints.
“Optimally, financial institutions will establish a digital ecosystem around consumers’ data that will benefit the consumer’s wallet in a positive way, not only changing advertising, data analytics and c-commerce, but also allowing for a better understanding people’s intimate relationship with their money and improving it,” said Duena Blomstrom, a U.K.-based chief marketing officer at Meniga.
2015 — a more refined 2014?
The collective consensus appears to be that 2015 will be a fine tuning of the innovations that defined 2014. Mobile payments and commerce got a shot in the arm in 2014, but needs more retailer and consumer adoption to ignite. Retail seems to be back on its feet, but there's been a shift in the mix of online and physical store consumption and expectations. Security breaches plagued 2014, and the wheels were put in motion to improve the security of cardholder data at the point of sale. Banks understand the importance of consumer engagement and are investing to strengthen those relationships.
2015 very much could, and likely should, be the year that all of these areas continue to reap the benefits of innovation, new technologies, new players and even new business models. The safe money seems to be on the fact that not much will change in 2015, but like fine wine, the 2014 vintage will improve with 12 months of aging. It’s hard to imagine that, however, given all of the uncertainties we face as we start the year. What’s PayPal going to look like as an independent company? How will Apple Pay evolve? What did the numbers really tell us about consumers' digital purchasing habits and the state of physical retail? How will tokenization influence the direction of payments and commerce? How will security threats evolve as commerce moves digital?
The pundits may have decided to play it safe with their 2015 predictions, but this year is likely to be anything but a continuation of the “same old, same old” that we started and lived through in 2014.