Can Smartphones Replace Cash And Cards?

by: American Funds

Summary

There's a big payoff for the winner of the race to change the way you pay.

Mobile payments see growing acceptance as volumes surge.

The movement toward mobile payments languished for some time, but there now seems to be growing acceptance among businesses and consumers.

Image shows growth in mobile payments and increase in acceptance of different payment types.

Sources: BI Intelligence (both charts) and Boston Retail Partners (left chart). Data for mobile payment volume are estimates and those for payment types are as of 2015.

Cash or check? How about smartphone. In 2014, customers in U.S. retail stores made an estimated $5.5 billion in purchases using a mobile device. That's only about 0.1% of the nation's sales. In 2019, however, shoppers are expected to spend an estimated $819 billion using a mobile device, or about 15% of sales, according to researchers at BI Intelligence. If correct, mobile payments may grow at a five-year compound annual growth rate of 172%, creating intense competition to provide digital wallets.

While there have been a variety of mobile-payment efforts during the past few years, notably PayPal, the introduction of Apple Pay last year raised the profile of this potential transition in the way people pay for goods and services. Less than 72 hours after its debut, 1 million credit cards had been used on the service. Google recently unveiled a mobile payment system called Android Pay that will compete with Apple and Samsung Pay, and PayPal recently announced the acquisition of a mobile-wallet maker.

The movement toward mobile payments languished for some time, but there now seems to be growing acceptance among businesses and consumers. Retailers from Wal-Mart to Whole Foods see mobile payments as the future, providing opportunity for numerous companies that facilitate the transactions. The CEO of a Dutch semiconductor company called 2014 "a very good year." Why? Because the company makes chips that help power the mobile payments system in Apple's iPhone 6.

You might also like:

The Cloud Potential Is Sky-High

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.

Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and not to be comprehensive or to provide advice.