The US is struggling to build a thriving mobile payments ecosystem. A number of factors — including slow merchant adoption, outdated infrastructure, and consumer attitudes — have been cited as the reasons mobile payments haven't fully taken off yet in the US.
China claims the world's largest mobile payments market and serves as the global benchmark for other markets to pursue. China will process a whopping $6.3 trillion in total mobile payments by 2020, according to our estimates based on iResearch data. This marks a healthy 33% five-year compound annual growth rate (CAGR).
It dwarfs the US' mobile payments industry. The US will generate $154 billion in mobile payments volume this year by our estimates, which equates to just 6.5% of China's mobile payments volume.Meanwhile, China will generate over $1,700 in mobile payments volume per capita in 2016, compared with $475 in the US, based on forecasts from BI Intelligence and eMarketer.
Tech companies have dominated the mobile payments market in China, but competition is beginning to heat up. Alipay and Tenpay collectively held a 90% share of China's third-party mobile payments market in January 2016. However, more companies are starting to offer up their own mobile payments platforms. New entrants include card networks such as UnionPay and handset manufacturers like Apple and Samsung.
Mobile commerce, a lack of legacy infrastructure, and marketplaces have fueled China's enormous success. Consumers in China are much more comfortable shopping on their mobile phones compared with their counterparts in the US, and the devices face less resistance from other legacy payments methods like credit cards. The open approach to mobile shopping has been fortified by Alibaba, a goliath-sized marketplace, and WeChat, a go-to messaging platform, which support Alipay and Tenpay, respectively.
The US can import some of these factors to give itself a boost. US payments providers and merchants should fully invest in checkout solutions to drive greater mobile commerce adoption. In addition, digital marketplaces like Amazon can use their clout to onboard mobile payments users, as Alibaba successfully did in China. Bundled features like those integrated into Alipay in China could also ultimately drive up interest in mobile payments among US consumers.
But there are some fundamental barriers standing in the way. The US is being forced to layer mobile payments on top of an existing payments system, which is an underlying factor stymieing growth. In addition, the US ecosystem is very [...]