Why Europe Will See Mobile Payments Success Before the U.S.

Once the world’s innovator and creator of the internet, the U.S. has fallen far behind both Europe and Asia when it comes to accepting and using financial technologies and making banking more efficient.

While checks are a thing of the past in Scandinavia, Germany, and East Asia, they remain the standard way to send money for millions of Americans. Even if they’re slow, frustrating, and susceptible to fraud, they remain the default in the U.S.

While there are obvious benefits to checks getting replaced with a more efficient payment system, the powers that be are slow to change the status quo.

Electronic transfers still take days, not seconds, to process, because regulators worry about upgrading the infrastructure that processes inter-bank payments. As NPR discovered, the payment system currently in place dates back to the 1970s, and there is little motivation to upgrade it.

Unsaddled with old infrastructure and more open to innovation and progress, nations like Finland, Sweden, and Germany offer instantaneous transfers between banks—and unlike wires in the U.S., these transfers are free or cost very little.

European nations have also implemented EMV and chip-and-pin standards that replaced the old magnetic stripe system that’s still the order of the day in America.

While the transition was not seamless, it completed years ago and all credit cards in the EU come with an embedded chip that makes fraud more difficult.

This leaves Europeans scratching their heads at why the Americans are a decade behind Europe, and mobile payment usage will likely to take even longer than acclimating to new credit cards.

All of this means that mobile payments will stay small in the U.S., even if they are growing at an incredible rate internationally.

Back in 2012, experts said we could see mobile payments reach scale by 2020, and since that survey was released, mobile payments have more than doubled to over $25 billion. While that sounds impressive, e-commerce accounted for $364 billion in the U.S. and $1 trillion worldwide in 2012. Since mobile payments include bank transfers as well as e-commerce, this means mobile payments still account for far less than 2.5% of total online transactions.