In Europe, Micropayments Are On The Rise

The micropayments market is set to grow rapidly in Europe. Overall, cash payments are decreasing in the region, and though they still remain the preferred means of payment, the emergence of micropayment solutions and products is fuelling the shift to digital money.

New analysis from Frost & Sullivan on Opportunities in the Micropayments Market finds that the growth of micropayments solutions will be driven by the usage of pre-paid, contactless, and mobile payment solutions. The analysis determines that use of contactless payment cards systems in Europe is expected to increase at a compound annual growth rate (CAGR) of 28.7 per cent from 2011 to 2017. Likewise, with the massive adoption of smartphones and increasing penetration of tablets in Europe, mobile commerce will record a CAGR of 10.6 per cent between 2011 and 2018.

As of now, the future of prepaid cards and prepaid mobile solutions seems brighter. “Turning cash into electronic funds in a stored value account is currently the best approach,” commented said Frost & Sullivan ICT Global Program Director Jean-Noël Georges. “A flexible solution, which includes issuing a prepaid mobile payment account where customers can load the money through peer-to-peer transfers, cash deposits or bank cards and then use the prepaid value with merchants, will encourage non-cash payments.”

Cloud-based mobile payments are also expected to contribute to the expansion of the micropayments market. “Cloud-based m-payments, in principle, are an extension of the traditional online commerce market. However, we believe that as cloud-based m-payment matures, and its awareness among consumers and merchants increase, the solution will play an important role for the in-store payments and micropayments markets,” said Georges.

The shift to digital money has a substantial benefit for banks and governments alike. In Europe, the cost of handling cash is high. The European Payment Council (EPC) is working on ways to improve processes and reduce the total cost. Moving away from cash, however, comes with many challenges attached. The preference for cash payment among the older generation of users, issues with the business model and lack of infrastructure as well as a clear marketing message have pegged back market growth in the short term.

Moreover, small retailers simply do not have the capacity for an electronic payment infrastructure and may just not see the advantage of leaving cash behind. New mobile payments providers might be able to change that however. With minimal effort and low costs, retailers are now able to turn almost any smartphone into a fully functional card reader. But in a region where old school rules, will merchants take the leap?