Mobile online retail payments in focus

Despite all the recent media hysteria surrounding mobile proximity payments, mobile online retail payments made through apps and mobile browsers continues to be the more mature market by a large margin, and that will continue to grow through 2019, according to a report from Javelin Strategy and Research.

Total mobile online retail payments are expected to grow from $75.8 billion to $217.4 billion at a 23 percent compounded annual growth rate between 2014 and 2019, according to Javelin’s Mobile Online Retail Payments Forecast. Javelin estimates mobile online retail commerce to have grown $17.8 billion during 2014 to reach $93.6 billion this year, according to the report.

“Despite what we’re hearing about proximity payments and mobile wallets, [on average] $19 is spent through mobile browsers and mobile apps versus $1 spent through mobile proximity payments,” Daniel Van Dyke, who authored the report and is a mobile research specialist at Javelin, told Mobile Payments Today in an interview. “It illustrates that mobile online retail commerce is the more mature market today and it’s expected to grow at a robust pace.”

Much has happened in the industry since the beginning of 2014 to help put mobile online retail payments in the background, despite its current position in the market.

Talk about mobile wallets from Apple, Google, and Samsung combined with Softcard’s demise and the Merchant Customer Exchange’s continuing troubles overshadow what’s been a growing segment of retail commerce over the years.

You don’t have to look much further for evidence of this than the beginning of the last holiday shopping season:

  • during the five-day stretch between Thanksgiving and Cyber Monday, Adobe, IBM and others released stats about shopping trends during that period and, while they varied, it was clear mobile devices impacted sales;
  • from Thanksgiving through Cyber Monday, overall online sales increased 12.6 percent, with mobile sales up 27.2 percent compared to the same period in 2013, according to the IBM Digital Analytics Benchmark;
    Cyber Monday mobile traffic accounted for 41.2 percent of all online traffic, up 30.1 percent over 2013. Mobile sales were also strong, reaching 22 percent of total Cyber Monday online sales, an increase of 27.6 percent year-over-year, according to IBM; and
  • twenty-nine percent of sales on Thanksgiving Day came from mobile devices, up from 21 percent in 2013, according to Adobe. Mobile devices drove 27 percent of sales on Black Friday, three percent more than last year.

But the story that received most of the attention during that period was how little iPhone 6 owners used Apple Pay despite all the hype leading to its release.

“[Mobile proximity payments] are a newer market, and there are more things going on, so naturally, it’s more interesting to discuss,” Van Dyke said.

But there are some interesting trends worth noting in mobile online retail payments.

Purchasers using mobile browsers exclusively totaled $10.7 billion in 2014, while app-exclusive purchases reached $5.9 billion. The large discrepancy flies in the face of what consumers say is a poor checkout experience in a mobile browser.

“What we’ve seen is that consumers browse Web pages at a higher rate than they download apps,” Van Dyke said. “I do think consumers are missing out and it’s possible they’re not aware of the capabilities offered through mobile checkout via an app.”

He added that the advent of HTML5 likely contributes to the large gap between mobile browser-based and app purchases.

Two more trends Van Dyke said are worth noting in the report:

  • “We’re starting to see that consumers are becoming less willing to pay for digital content with mobile devices, which to me hints that either freemium models or ad-supported models are going to be increasing critical to monetize digital content and that subscription-based services like Spotify and Netflix are sort of the way of the future.”
  • Physical goods are the most popular products purchased through mobile phones, with 51 percent of mobile purchasers buying such goods. Van Dyke believes that some consumers have moved past three issues that might have prevented them from making such purchases in the past: a preference for existing payment methods; security concerns; and not seeing the value of mobile payments. “I think the market as a whole has made pretty enormous strides to address all of those reasons,” he said.
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