American Express: Mobile payments a $25T opportunity

Mobile wallets may not be enjoying widespread adoption, but mobile payments are poised to capture a $25 trillion market of non-charge payments.

As m-commerce continues to grow, so too will mobile payments. But it may not come in the form of converting credit card users, according to Ken Chenault, CEO of American Express.

Less than 1 percent of all e-commerce transactions are made on mobile devices, but by 2017 that figure is expected to be 26 percent, Chenault told Fortune. That excludes the number of mobile transactions made in stores.

"People who use mobile devices in the shoppers' journey are 40 percent more likely to convert to sales. Think about how people use information, how they leverage recommendations they get from social media sites. The key is to understand the different elements of the commerce journey," he said. American Express is angling to be the means by which shoppers make those transactions, but in a less traditional manner than paying by credit card.

American Express – home to the platinum and black card, the place where membership has its privileges – is gunning for the unbanked. It wants to serve those shoppers who use pre-paid cards, the ones that pay high annual fees on debit cards and below minimum bank balances. "…It is expensive to be poor. But we can develop a model where we have attractive economics, so instead of paying $14.95 a month for a prepaid card, you pay $1 a month with us for a far better service," he said.

These are Walmart (NYSE:WMT) shoppers, the very ones the retailer had in mind when it launched a buy online, pay in cash at the store initiative. Click and collect is rapidly becoming universal in this omnichannel retail environment, but roughly one third of the U.S. population doesn't have access to a bank, let alone credit.

In the mobile payments space, there's an opportunity to provide services with benefits that go well beyond tap to pay. Peer-to-peer is the sweet spot in mobile payments, particularly when paired with targeted services.

"You have got to connect peer-to-peer payments with a range of services that meet a variety of needs. As a standalone, it's difficult to generate the economics you need. But there's a very high demand," said Chenault. "We looked at where spending takes place. Outside of credit cards and charge cards, there's $25 trillion out there. That's a tremendous opportunity."

For more:
-See this Fortune story

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Shoppers uneasy with mobile payments as Square kills Wallet
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Mobile wallet adoption doesn't match the hype

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