It's no secret that mobile payments are growing by leaps and bounds. It's not hyperbole to say that mobile payments are the future of financial transactions, especially in the consumer-to-business marketplace. Is that future happening sooner than you might think? It looks that way - if a new report from Forrester Research and PayPal has it nailed. (For related reading, see Mobile Money: Using Your Cell Phone To Transfer Funds.)

TUTORIAL: Credit Cards

Change is Coming Sooner Than You Think
First, know that mobile payments are already widely viewed as being "mainstream." A July 2011 study from KPMG notes that 72% of business executives say that such payments, on a large scale, are inevitable. Another 58% say that their companies already have a mobile payment system in place.

"We believe that exploding smartphone growth and a myriad of opportunities will grow mobile payments at a much faster rate than our respondents anticipate," said Gary Matuszak, KPMG global chair of the Technology, Communication and Entertainment practice, in a statement. "A wide variety of payments is ready for adoption, as several key players already provide or are rolling out mobile payments, and interest among consumers in utilizing mobile payments is growing, in line with the industry's readiness to deploy them."

That could be happening faster than even the most optimistic mobile payment advocate could have hoped. Recent data from the U.K. arm of Forrester Research, in partnership with PayPal, estimates that mobile payments will replace other forms of payment by 2016.

No Wallet? Use Your Smartphone Instead!
A PayPal article, entitled No Wallet Required, examined the British mobile payment marketplace and concluded that "digital money" will become the go-to payment method within the next four years.

"We'll see a huge change over the next few years in the way we shop and pay for things," says Carl Scheible, Managing Director of PayPal U.K. "By 2016, you'll be able to leave your wallet at home and use your mobile as the 21st century digital wallet. Our vision of money is to enable you to pay for something from wherever you are, whatever device you're on – a PC, mobile phone, tablet, games console [sic] and a whole lot more." (For more, check out 8 Low-Cost Ways To Transfer Money.)

Scheible adds that paper currency won't go away entirely, but will face a diminishing demand. "The lines between the online world and high street will soon disappear altogether," he says. "Children born today will become the U.K.'s first 'cashless generation.' It will be completely natural for them to pay by mobile."

PayPal should know. It already processed about $3.5 billion in mobile payments in the U.K. in 2011 alone – that's five times the amount that the online payment giant saw in 2010.

The Bottom Line
The report says that the trend is only growing stronger with each passing year. About 50% of all mobile or smartphone device users bought something via mobile payments in the three months leading up to the publishing date of the study.

That number will grow, the data shows, and will cement mobile payments as the payment of record for consumers not just in the U.K. but also in the U.S.(To learn more about this technology, see New Technology: Pay Without Your Wallet.)

Related Articles
  1. Economics

    Explaining Manufacturer’s Suggested Retail Price

    The manufacturer’s suggested retail price (MSRP) is just what it describes – the price manufacturers recommend that retailers charge for their goods.
  2. Credit & Loans

    Explaining Equated Monthly Installments

    An equated monthly installment is a fixed payment a borrower makes to a lender on the same date of each month.
  3. Economics

    Calculating Cross Elasticity of Demand

    Cross elasticity of demand measures the quantity demanded of one good in response to a change in price of another.
  4. Personal Finance

    What to Collect: Apple Watch vs. Luxury Watches

    The "iWatch" is a new player in the luxury watch world. But will it stand the test of time? Some points for collectors to ponder.
  5. Stock Analysis

    2 Reasons PepsiCo's Snacks Division is Crucial to Its Growth

    Understand the recent trends in the North American snacks market. Learn about the top two reasons why PepsiCo's snack division is crucial to its growth.
  6. Personal Finance

    Alpaca vs. Cashmere: Which Luxe Wool Is the Best?

    Winter is coming. Which of these luxury threads is most worth the price (and how to distinguish true luxe from cheap imitations).
  7. Stock Analysis

    Top 3 Stocks for the Coming Holiday Season

    If you want to buck the bear market trend by going long on consumer stocks, these three might be your best bets.
  8. Investing Basics

    Tiny House Movement: Making Market Opportunities

    The tiny house movement throws all assumptions about household budgeting and mortgage management out the window, and creates new market segments too.
  9. Investing Basics

    A Gluten-Free Makeover For A Supermarket Near You

    The gluten-free diet is changing the food choices of a large number of consumers, and the food industry is taking note and making the needed adjustments.
  10. Professionals

    Small Business: Minimize Your Credit Card Fees

    Accepting credit cards is a must these days, but small business owners can take steps to minimize profit-eating credit card fees.
  1. What does marginal utility tell us about consumer choice?

    In microeconomics, utility represents a way to relate the amount of goods consumed to the amount of happiness or satisfaction ... Read Full Answer >>
  2. What are some common ways product differentiation is achieved?

    There are many ways to achieve product differentiation, some more common than others. Horizontal Differentiation Horizontal ... Read Full Answer >>
  3. What role does the OEM (original equipment manufacturer) play in the finished product?

    Original equipment manufacturers (OEMs) do not typically play much of direct role in determining the finished product. However, ... Read Full Answer >>
  4. What is the difference between an OEM (original equipment manufacturer) and a VAR ...

    An original equipment manufacturer (OEM) is a company that manufactures a basic product or a component product, such as a ... Read Full Answer >>
  5. Is the retail sector also affected by seasonal factors?

    Generally speaking, the retail sector is highly seasonal. Almost invariably, sales in the retail sector are highest in the ... Read Full Answer >>
  6. What has the retail sector evolved to its current structure?

    Retail is the catch-all phrase for the sale of final goods to consumers; a retail transaction is considered an "end" and ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!