Brief:

• U.S. mobile peer-to-peer payments will grow 55% this year to more than $120 billion, a figure that will double in the next four years, according to researcher eMarketer. In addition, 63.5 million U.S. adults this year will use a P2P payment application at least once a month, or about one-third of smartphone users.

• Zelle, a network of credit unions and more than 30 major banks such as Bank of America and JPMorgan Chase, will roll out in the next 12 months and underpin the growth of P2P payments. Zelle’s support from major financial institutions has earned it the nickname as the “Venmo killer,” referring to PayPal’s P2P payment service, The Wall Street Journal reported.

• Mobile payment apps like Apple Pay and Google Wallet aren’t gaining much traction in the U.S., where people are comfortable using credit and debit cards, eMarketer said. By the end of this year, 48.1 million Americans ages 14 and older, or 23% of smartphone owners, will have used a mobile payment app at the point of sale at least once in the prior six months. That percentage will reach 31% by 2021.

Insight:

EMarketer provides an interesting forecast on how P2P payments will be more accepted by smartphone users than contactless payments with merchants in the next four years. That’s not to say mobile payments will be completely stunted. The researcher forecasts that mobile payments will grow 78% to $49.3 billion this year while average spending per user will grow to $1,026.

The forecasted growth in P2P payments points to how a solution like Zelle, that spans many of the major players to offer consumers added convenience with single, coordinated solution, can drive consumer adoption. Unfortunately, when it comes to using mobile to pay at the point of purchase or even online, the number of options available to consumers is confusing and is likely one reason for the slow adoption rate of payments. The U.S. has been slower than other countries to adopt mobile payments, including China, India and parts of Europe. Sweden is the most cashless society on the planet, with banknotes and coins accounting for just 1.7 percent of its GDP, according to Bloomberg News.

Zelle, if successful, could provide a foundation for a more coordinated mobile payments platform backed by major banks as P2P payments are a good way to introduce consumers to the convenience and benefits of mobile payments. 

The growth in mobile payments will provide marketers with a greater opportunity to offer seamless transactions to customers, not only for online shopping but also in physical stores. Grab-and-go sales and in-aisle scanning of products to cut down on wait times at checkout are just two of the innovations that mobile payments will bring to retailers. 

Companies that accept mobile payments grow faster and are more profitable than companies that don’t, according to a study this year sponsored by NTT Data Inc. The study found that among businesses with yearly sales growth of 11% or more, 43% have an app that supports purchases and payments, compared with 32% of slower-growth businesses.

Some economists see many benefits from becoming a cashless society: lower transaction costs, improved tools to manage the money supply and an end to tax evasion and money laundering. Critics worry that going cashless means an end to privacy, greater powers for governments and higher costs that would hit poor people the hardest. India’s policy to ban cash this year as a way to root out corruption had the worst effects on impoverished groups that spend small amounts. A cashless financial system also makes it easier for banks to implement negative interest rates — the policy of charging customers for holding onto cash instead of spending it to boost the economy, as the European Central Bank and the Bank of Japan have done.