The Year In Mobile Payments

Well, another year will soon be one for the history books, and given the type of year 2016 has been, we imagine it will be a chapter future generations will find themselves flipping through repeatedly.

The year opened with the stock market crashing for a month on the slowdown in the Chinese economy, and then, at the halfway mark, the U.K. decided to exit the EU in what ended up being the year’s second-biggest geopolitical surprise.

And while Brexit would have, under normal circumstances, been the year’s winner for unexpected twists, 2016 was a very special year that (in true reality TV style) saved the twist to end all twists for the end. Donald Trump managed to eke out a stunning Electoral College victory over Hillary Clinton and get himself elected president of the United States of America.

Those were just the highlights that shook global markets. There were also the minor shocks of every rock star dying at once — except Bob Dylan, who not only managed to outlive David Bowie, Prince, Lemmy, Leonard Cohen and Merle Haggard but also snagged the Nobel Prize for literature. Kim Kardashian kept the receipts and exposed Tay-Tay for the mean girl we all kind of knew she was. And, of course, Brangelina broke up, leaving us all to wonder if love is real after all.

But while while many things changed in 2016, one thing did not. Consumers still did not adopt mobile payments en masse at the physical point of sale.

This was despite yet another year of predictions that this was the year it was really going to happen this time. Consumers were about to ditch their cards for the wonder of phone-based payments, according to our tracked data this year, but when consumers stepped up to the physical POS, they used a plastic card more than 90 percent of the time. We would say that payments prognosticators sound like Chicago Cubs fans, but the Cubs actually won the World Series in 2016.

But even though mobile payments did not blow up the cash registers this year, it would be unfair to say nothing happened. In fact, an awful lot happened. Most notably, the entire ecosystem caught on to the fact that they aren’t competing with each other so much as they are trying to come between customers and their cards. Even if they happen to issue those cards.

It’s been a strange year.

So, what were the mobile payments highlights?

The Card Is The Competition

In the early days of the war for mobile supremacy, the assumed position was that the wallets and their providers were essentially competing with each other; by the end of 2016, the takeaway is somewhat different. The mobile wallets aren’t primarily competing with each other; they are competing with the plastic cards that consumers have a decade-long habit of successfully and securely using.

That has been one of the key takeaways from our conversations with Walmart, PayPal, Visa, Mastercard, Chase, Citibank and Samsung over the course of the last year. Mobile payments have many features consumers like very much — they are quick, easy to use and safe. The problem for mobile is that cards are also all of those things and have the additional benefit of being usable nearly anywhere.

This is reflected in PYMNTS mobile payment tracker data, which indicates that consumers are, on the whole, satisfied and even pleased by the usability of mobile payments. Nonetheless, they don’t use them because the vast, vast majority of them are satisfied with their current method of payments and, as such, rarely remember to even try to use a mobile payments method.

This was the year card companies en masse realized that innovating payments was first about realizing it’s not about the payments since customers already have a way to do that that works well for them.

Instead, mobile payments options have to offer them something better — a payments innovation that is about more than payments.

Cooperation Is The New Cool

As the realization has dawned that mobile operators are competing with customer card-carrying way more directly than they are competing with each other, the year has seen a variety of players, even some unexpected ones, team up to take on the digital payments revolution.

PayPal has spent the year working hard to bring an ever-larger number of collaborators to the global digital financial platform it has built over the last 17 years. It did partnerships with both Mastercard and Visa and put to rest the longstanding suspicion that PayPal was trying to disrupt the networks by guiding consumers to the ACH rails.

“The only way for any one of us [the various mobile payments and commerce players] to gain is for us to work collectively, and then, we all gain. We firmly believe that, as digital continues to evolve, there will be enough economic gain to make it worthwhile for everyone,” PayPal Head Of Global Core Payments Jim Magats told Karen Webster.

PayPal doubled down on that this year right down to the wire with the announcement of two new partnerships with credit card issuing behemoth Citibank and financial technology firm FIS, which will enable both the easy provisioning of PayPal cards via the bank’s mobile app and a co-branded experience for the banks.

And while PayPal has been one of the year’s more active collaborators, they have been really part of a trend. Visa and Mastercard are working to tag team tokens together to create a universal security standard for transactions across channels.

Samsung is exporting Samsung Pay (in a limited capacity) to Android devices (it tried with Apple, but Apple said no), and Walmart Pay and Chase have even teamed up to work in tandem to bring mobile payments to more shoppers. Speaking of teaming up, Chase also teamed up with LevelUp down the stretch to give customers more easy access to mobile QSR ordering, payments and rewards options.

There were holdouts and some proponents of walled gardens with fairly minimal collaboration with outside mobile ecosystems — *cough* Apple *cough* — but on the whole, the mobile wallet operators decided that the answer to the eternal question “why can’t we be friends?” should actually be “no reason — let’s be friends.”

It’s All About The Channels

Consumers may not have been looking for a new payment method, but that doesn’t mean payments can’t be innovated upon to provide something that all consumers are looking for — a better experience.

And, as our experts spent the year observing, for the majority of increasingly digitally enabled and savvy consumers, that means the ability to engage in commerce smoothly and seamlessly, no matter where or how they happen to be shopping. The goal isn’t to change how the customer pays so much as it is to make the customer’s experience of payment — whether it’s a swipe, a tap or a buy button press — quick, easy, secure and (if possible) rewarding.

It is less about building better wallets and more about making it possible for issuer-branded credentials to function seamlessly for the customer wherever they happen to shop and making it easier for merchants to plug and play without a complex or onerous integration.

“I think, initially, we all were a bit infatuated with making it happen and the possible and the technical side of it,” Mastercard EVP of Digital Partnerships Sherri Haymond noted on the early days of mobile payments across the industry. “Now, we want to help banks reach their customers with digital transaction solutions that are totally consistent with everything they are already offering.”

So, will 2017 be the year that mobile wallets ignite at the POS? Will one mobile wallet emerge to rule them all? Will those even be the right questions to be asking a year from now — particularly given mobile wallets are thinking a lot less about payments and a lot more about enabling multichannel consumer experiences?

The answers to that — and all of your other questions — in 2017.

Can’t wait that long?

Tune in next week for our predictions for What’s Next.