Mobile payments are touted as a financial revolution that will take off by 2020. Granted, some countries are leapfrogging the rest of the world in this department, but that is no reason for future success. According to Fitch Ratings, however, the transition to mobile payments may take a lot longer than anticipated.  In fact, it may take decades for this new form of transferring value to become a mainstream trend.

Innovation Does Not Mean Immediate Adoption

On paper, mobile payment

solutions are an innovation. Rather than letting consumers deal with cash, payment cards, and whatnot, they can use their smartphone to complete purchases. Despite current small transaction limits, this concept seemed to capture the imagination at first. But fast forward to today, and adoption of this new payment standard remain at an all time low.

This is not for lack of consumer interest, mind you, but rather because retailers are hesitant to upgrade payment terminals for this “flavor of the year”.  Fitch Ratings seems to be thinking along the same lines, as they predict 

 that it may take multiple decades before the transition to mobile payments is a thing. To put this into perspective, e-commerce has been around for 20 years, but still accounts for only 8% of US retail spending.

The road has been long and challenging for mobile payment providers. Without an economic incentive, hardly anyone will think of their smartphone as their new wallet. Samsung recently rolled out a loyalty program in the US to bolster their mobile offering, although it remains to be seen if this will spur new interest in Samsung Pay.

Consumers are a demanding group, and they will look for whoever gives them the most bang for the buck.  Retailers offering discounts, cash backs, or other rewards when paying with mobile devices will have a leg up over their competitors. So far, these have been very slim pickings, and it appears that the situation will not change anytime soon.

But there is a bigger problem plaguing the mobile payment industry. Far too many different payment apps have been released to the public without there even being a valid use case for them. The financial ecosystem is fractured as it is, and mobile payments only make the problem worse. Without bank partnerships, consumers can’t use most of these options. The fact that retailers prefer to develop their own proprietary solutions is not helping matters much either.

Expensive payment terminal upgrades are hindering adoption as well. Apple’s solution requires

NFC-capability, whereas Samsung Pay can be used in conjunction with magnetic stripe readers. Having an over-saturated market for a payment solution, which no one is sure will even be a thing in three years, could spell the downfall for mobile payments in the coming years.

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