A lot has been made about
's move to enable mobile payments through its new iPhone 6 -- a
News reveals more than 750 articles published in just the last 24
hours -- but much of the discussion focuses on just one side of
the equation: customers, not merchants.
In this context, one recent study reveals there is still a
significant opportunity out there for companies such as
Bank of America
In every payment transaction, whether it's at a major retailer
or a small business down the street, a merchant is paying some
company's merchant services division a fractional amount of every
sale to allow them to accept that credit or debit card
The Nilson Report revealed that in the U.S. alone, the total
2012 purchase volume of the 78 billion transactions stood at
nearly $3.8 trillion. When you consider that transaction number
is projected to grow to 120 billion by 2018, it is no wonder the
payments industry gathers so much attention.
Not only are customers now increasingly able to make payments
with their phones, merchants for years have been able to accept
payments with physical cards on both mobile phones and
A 2013 survey from Gallup reveals a number of surprising
realities about the current state of that industry, which IDC
projects willprocess $720 billion worth of payments by 2017.
The surprising outcomes
It first must be noted that companies in the merchant services
business have been diving into mobile landscape with incredible
velocity. Amazon made headlines in August when it
Local Register, which the online retailer described as"a
secure card reader and mobile app that provides local businesses
with the tools they need to quickly and easily accept credit and
debit cards from a smartphone or tablet and keep track of their
Source: Amazon & Business Wire.
The biggest news came not from the product itself, which in
many ways wasn't new, but from Amazon's intention to chargea
transaction fee of just 1.75% per swipe through the end of 2015
for merchants that sign up by Oct. 31, and 2.5% after that.
Popular mobile payment service
charges 2.75%, while the Clover tablet
from Bank of America Merchant Services -- a
Bank of America
and First Data joint venture -- starts at 2.5% plus $0.20 and
gradually progresses downward. So the service offered by Amazon
dramatically undercut the industry standard rates for mobile
This difference of 1% between the fees from Amazon and Square
would mean an extra $10,000 in the hands of a small business
owner who had $1 million in sales.
So why is all that important in light of the results of the
? The first surprising insight was that just a small fraction of
businesses actually use mobile payments:
This survey data is nearly a year old, so these numbers have
likely increased, but the fact remains that there is a massive
opportunity for financial companies (and, indeed, nonfinancial
companies such as Amazon) to expand to allow businesses to
process payments on a mobile device.
Even more striking in the Gallup poll was how distinctly
dissatisfied customers were with their current products:
The key takeaways
To know such a small number of businesses can currently accept a
standard card payment through a mobile device and an even smaller
number are satisfied with the product they use, there is no
denying the a massive opportunity that exists in the mobile
payment industry for merchants, not just consumers.
I also have to wonder this: Assuming the number of merchants
that have the flexibility and capability to allow customers to
pay with their credit cards anywhere continues to grow, why would
there ever be any reason for a customer to make payments with
their own phones?
Bank of America + Apple? This device makes it possible.
Apple recently recruited a secret-development "dream team" to
guarantee its newest smart device was kept hidden from the
public for as long as possible. But
the secret is out
, and some early viewers are claiming its destined to
change everything from banking to health care. In
fact, ABI Research predicts 485 million of this type
of device will be sold per year. But one small company
makes Apple's gadget possible. And its stock price
has nearly unlimited room to run for early in-the-know
investors. To be one of them, and see Apple's newest smart
The Hidden Opportunity in Mobile Payments
originally appeared on Fool.com.
owns shares of Amazon.com, Apple, and Bank of America. The Motley
Fool recommends Amazon.com, Apple, and Bank of America. The
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