KEY POINTS

  • The payments industry is going through a period of rapid transformation brought on by the transition to digital. That's because payments is about transferring information from one party to another, and nearly every stakeholder in the industry benefits when that process runs on digital rails.
  • 2016 will be a watershed year for the payments industry. Payments companies are improving security, expanding their mobile offerings, and building commerce capabilities that will give consumers a more compelling reason to make purchases using digital devices.
  • Payments is an extremely complex industry. To understand where the next big digital opportunity lies, it's critical to understand how the traditional credit- and debit-processing chain works and what roles acquirers, processors, issuing banks, card networks, independent sales organizations, gateways, and software and hardware providers play. Card payments involve thousands of companies competing and collaborating to facilitate transactions. 
  • Mobile provides the common ground for many of the biggest leaps happening within the payments industry. Smartphones have become the go-to computing device for every digital activity, and payments is no exception.
    • The groundwork has been laid out for mobile in-store payments to gain traction this year. Major smartphone companies, such as Apple, Samsung, and Google, have all built mobile wallet platforms. Meanwhile, merchants are inadvertently rallying behind a common mobile payments technology — near field communication (NFC). A wide base of potential users on the consumer and merchant sides should unlock the potential of mobile payments this year. We forecast US in-store mobile payments will grow from $120 billion in 2016 to $808 billion by 2019. 
    • New mobile buying options will accelerate mobile commerce. Mobile browsing is skyrocketing. However, small smartphone screens, spotty internet connections, and cumbersome purchasing processes are keeping mobile commerce from taking off. Payments companies are going after this opportunity by releasing buy buttons to help ease the friction of mobile shopping and capture a share of processing revenue. As mobile shopping barriers drop, mobile commerce will match PC commerce and eventually overtake it.
    • Mobile peer-to-peer (P2P) money transfers will become more common, and services will become more competitive. Although P2P payments are thriving off social commerce and network effects, their revenue potential remains limited. P2P apps like Venmo will look to evolve into platforms that come with other, more lucrative payment capabilities, including in-store payments. Simultaneously, mobile wallets like Apple Pay will likely add P2P capabilities to [...]