Google Wallet, the peer-to-peer
payments service developed by Google (NASDAQ: GOOG; GOOGL), was first released
in the United States in September 2011. From the beginning, Google Pay allowed
its users to make point-of-sale purchases with their mobile devices using
near-field communication (NFC) technology. Four years later, the multinational
tech giant shifted its NFC payments to Android Pay, limiting contactless payments
to users of its Android mobile operating system. This move made sense, as Apple
(NASDAQ: AAPL), Google’s primary competitor in the mobile operating system
space, released its proprietary Apple Pay platform months earlier in October
2014. Both Apple and Google boast expansive availability in the U.S. According
to a 2015 report by The Verge (http://nnw.fm/fBBC6), Android Pay is available
on more than 70 percent of available Android devices and accepted across a
network of more than 700,000 merchants.
With these statistics in mind,
the rising tide surrounding contactless mobile payments remains under the
radar. In December 2014, CMO.com reported (http://nnw.fm/3Oxjh) that U.S.
proximity payment transaction values doubled from 2012 to 2013, and eMarketer
projections call for continued growth in the years to come as consumers warm to
the idea of paying with their phones. Research firm Forrester shares this
vision. In a 2014 report, Forrester predicted that mobile-based payments in the
U.S. will reach $142 billion in volume by 2019, up from just $50 billion at the
time of the study.
The maturation of the mobile
wallet market will create opportunities for tech giants like Google and Apple,
to be sure; and other household names, such as PayPal (NASDAQ: PYPL), Visa
(NYSE: V), Chase (NYSE: JPM) and AT&T (NYSE: T), have already thrown their
hats into the ring as well. Just two years ago, the market leader in mobile
payment apps, according to the CMO.com report, was Starbucks (NASDAQ: SBUX),
with an impressive 29 percent of all U.S. smartphone owners who had used mobile
payment apps to make a purchase having done so with the coffee chain’s
proprietary wallet app. While this peculiar statistic demonstrates the
relatively low barriers of entry that currently exist in the mobile wallet
space, it also highlights the difficulty companies are having in getting
consumers to take advantage of the convenience of contactless payments. A 2015
study by Accenture (http://nnw.fm/a9kMl) found that while 52 percent of North
Americans are “extremely aware” of the availability of mobile payments, only 18
percent use them on a regular basis.
In an April 2015 poll by
Statista (http://nnw.fm/OkO38), PayPal landed in the top three mobile wallet
services in the U.S. in terms of user satisfaction, and this favorability has
resulted in steady expansion of payment volumes. In the second quarter of 2016,
PayPal’s net payment volume totaled $86.2 billion, up 28 percent
year-over-year. This growth is telling of the value proposition offered by PayPal
to its consumers, which extends across both Android and iOS, as well as
integrating within merchant-oriented payment platforms to combine convenient
payment options with targeted coupons for frequent shoppers and other services.
Throw in Venmo, the mobile payment service acquired by PayPal in 2013 for $800
million, and its active user base of more than 1.5 million, and you’ve got the
makings of a serious competitor for both Apple Pay and Android Pay.
Of course, the U.S. is just the
tip of the iceberg when it comes to the expected proliferation of digital
wallets in the coming years. In September 2015, a MasterCard (NYSE: MA) study
found that digital wallets were the primary topic of discussion regarding
payment innovation in a number of the world’s largest emerging markets,
including India, China, Indonesia, Malaysia, Nigeria and the UAE
(http://nnw.fm/x8edQ). The study went on to find that these markets are
particularly ripe for innovation, with people pointing toward security as their
primary concern in adopting electronic payment methods. As a result, MasterCard
is looking into the integration of facial recognition software and biometrics
in order to make payments both easier and more secure.
PayStar is a less-known play in
the digital wallet space that’s targeting the needs of emerging markets.
Founded in 2006, the company provides financial institutions with a complete
solution enabling remittance services, merchant services, mobile payments and payroll
services for their customers. In addition to its operations across North
America, PayStar offers flexible services that meet the unique needs of markets
in the Middle East, Europe, Asia and Africa. The company is currently in the
process of expanding its mobile payroll and remittance services throughout the
Middle East, beginning with Qatar, the UAE, Oman and Saudi Arabia. Through
partnerships with local financial institutions, PayStar is positioned to market
its services to more than 15 million migrant workers in Qatar and Oman alone.
For the investment community,
PayStar’s established and growing position on the global mobile payments stage
is particularly intriguing following the recent announcement that Net Element,
Inc. (NASDAQ: NETE), a provider of global payment technology solutions and
value-added transactional services, has entered into a binding letter of intent
to acquire a majority interest in the company. Subject to closing, Net Element
intends to create one or more entities that will house the combined assets of
PayStar and Nexcharge, a proprietary payment processing, fraud management and
merchant management platform. Net Element will own a 51 percent interest in
these newly-formed entities and maintain an exclusive option to acquire the remaining
49 percent interest for 12 months following the closing of the transaction.
With the planned acquisition of
interests in PayStar and Nexcharge, Net Element will look to bolster what is
already a sizable presence in the global payments industry. Just last month,
the company’s wholly-owned subsidiary, PayOnline, was ranked as a leading
payment gateway by independent market analytics agency Tagline.ru. Building on
this position, PayOnline recently introduced a new adaptable, multi-channel
payment interface to more than 10 million online shoppers in over 3,000
international e-commerce markets. Combining this commitment to innovation from
within with an aggressive M&A strategy has Net Element prepared to expand
its presence in emerging markets, as discussed by CEO Oleg Firer in a recent
news release.
“These acquisitions will allow
Net Element to present transactions for processing directly to Visa,
MasterCard, American Express and other networks, as well as expand our presence
in GCC region and other selected markets,” he stated. “These acquisitions will
add to the growth of our business and increase market share internationally.”
With the persistent focus on the
domestic mobile payment scene, it’s easy to overlook the immense opportunities
currently being presented by emerging markets. Adults in markets across Africa,
Asia and Latin America still lack access to formal financial institutions, as
noted by EY (http://nnw.fm/0Ocg1). As a result, mobile commerce options such as
digital wallets already outpace traditional bank accounts in several emerging
countries. While newcomers in the domestic market are forced to go head-to-head
with the likes of Google and Apple, Net Element, through the acquisition of
interests in PayStar and Nexcharge, is set to quietly expand its already
sizable presence on the global stage by continuing to meet the unique needs of
consumers in emerging markets.
For more information, visit
www.NetElement.com
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