Contrary to popular belief, Latin America and other emerging markets should be seen as shaping the future of mobile payments, as confirmed by recent research by StrategyEye Digital Media.
Due to minimal diffusion of traditional point of sale (POS) infrastructure, mobile payment companies note the gap for market entry in countries such as Mexico, where there are an estimated 20 POS terminals per 1000 people, compared to 30 in Europe. Thus, the potential for, and ease of building mobile payment infrastructure from scratch remains higher in emerging markets, where the need to heavily educate consumers to make a switch in payment habits is also significantly lower.
Jacob de Geer, CEO of mobile payment firm iZettle, informed StrategyEye that micro-merchants are key for the infiltration of mobile payment systems. Although their turnover remains low, the scale of their aggregate impact is enormous, especially in developing regions. Whereas Europe’s micro-merchants currently encompass 20-30% of GDP and 60% of total employment, the figures expand in the case of emerging markets: comprising 50% of GDP and around 70% of total employment. Mobile payment firms targeting the lower end of the spectrum, as opposed to high-profile companies and brands, can thus bank on a superior chance of market penetration.
The research also highlights the impact of smartphone penetration, which has reached its saturation point in the U.S. and some European markets. In comparison, consumers in Asia Pacific, the Middle East and Africa continue to trade in their basic phones for low-end smartphones, with low-price options increasingly nurturing the rate of smartphone penetration in these regions. In fact, the research confirms that sales of low-cost devices are forecasted to hit 200 million by 2018: a growth of 2000% over the next four years.
Nick Gregg, CEO of StrategyEye Digital Media states: “Penetration of smartphones in emerging markets lends itself extremely well to mobile payment device plugins provided by the likes of Square and iZettle. The prospects for micro-merchants to grow is huge and provides an opportunity for these more agile disruptive providers to grab market share before existing payment gateway providers target this sector effectively.”
