How Big Can Mobile Payments Get? Bank of America Tells All

September 17, 2015         By: Steven Anderson

It’s not hard to see how mobile payments is going to be a big industry.

Just the other day we saw how this industry was set to “explode” with growth thanks to the three major enterprises being ready to go, and several major developments in security, trustworthiness and ease of use are all combining together to make a field that’s ripe for growth.

But just how much growth will there be? How big an “explosion” are we talking about here? According to a report from Bank of America, the best word to describe such an explosion will be “huge.”

The reports put Bank of America as being convinced of growth that measures fully 200 fold in just seven years. Yes, by the time 2022 rolls around, the mobile payments growth will reach a combined total of around $3 trillion. That’s up from just $16 billion today, reports suggest, and with both opportunity and threat afoot, there will be opportunities and challenges aplenty.

That’s a lot to take in by itself, but it only gets better from there: the report suggested that the mobile payment industry will, in the Indian market, account for fully one in every 10 payments by 2022. Given that right now it’s actually around 0.1 percent, that’s a huge jump upward.

This is going to mean huge potential gains for banks, telecom firms, independent mobile wallet operations and more, but for traditional banks and those who stand to suffer from what the Bank of America report called “dis-intermediation,” it meant bad news ahead.

Payment through paper—which is basically cash, by some reports—is set to fall to be under two percent of the market, a report that’s been heard before and occasionally doubted. Meanwhile, the overall loss of cash in the economy as users switch to mobile will actually have an impact on lending rates, and may even drive some growth over time.

There are some issues that may affect the overall impact, however, including the rise of smartphone use and an overall perception of products being cheaper to purchase online.

That actually raises an unexpected issue, one that’s been echoed throughout a lot of government halls of late: monetary policy. When people stop turning to cash, and instead turn to online options, is there a deflationary effect? Or an inflationary one? Where cash requires no specific backing, beyond the faith and credit of its issuing government, it is inherently limited by the ability of printing presses to churn out bills.

When that limitation is gone, what happens? Does the value of cash become more valuable since there’s less call for it? Does it get to a point where there are two prices, one in physical cash and one in cash via mobile payment? That may not actually happen, of course; cash could just be sublimated into mobile payments, and people could treat it as if it were a wallet full of physical cash.

There is a possibility, even if remote, that the reduced use of cash in favor of mobile equivalents could have an impact on money supply and therefore monetary policy.

Still, it’s clear: we’re going to see some very big changes afoot when it comes to mobile payments, and the market is going to look very different in those seven short years. There’s a lot of excitement afoot here, so stick around…we’ve got a lot of ground to cover in that time.