Mobile Vs Wallet: are traditional payments about to become obsolete?
The mobile phone has established itself as a crucial part of our daily lives, with over 34% of adults checking their phone within the first five minutes of waking up.
A predicted 46 million smartphone users will exist in the UK alone by 2018, and the ever increasing capabilities of the smart phone continue to make it an essential tool for all consumers. As a result, the mobile phone has led to a significant reduction in the use of devices such as the mp3 player, digital compact camera and GPS navigation system. The only thing that has been missing from the Swiss army knife that is the smart phone is the ability to make payments. With the recent developments in the mobile payments space, is the mobile soon to wipe out the physical wallet too?
In 2015, 13% of UK adults made a mobile payment in-store (a 10% increase from the previous year) and, according to research carried out by Visa (2015), the number of people spending via mobiles is set to increase significantly over the next five years, with £1.2 bn projected by 2020 in the UK alone. The same Visa research showed that 43% of consumers would be interested in adopting a mobile wallet and that 47% would be inclined to use a mobile to make contactless payments in-store. In 2015 non-cash payments over took cash for the first time, illustrating that UK consumers are becoming less traditional when it comes to payments which is certainly a step in the right direction for mobile. The future of mobile certainly looks promising.
There are numerous benefits of incorporating mobile payments, including the fact there is less to carry with no need for multiple cards or cash, rewards become much more personalised and added layers of authentication make them a more secure way to pay, particularly in card-not-present situations.
However, are consumers really likely to leave their wallet at home in favour of mobile? In certain situations I’d say yes. When merchant acceptance is mainstream, leaving your wallet at home when running errands, visiting the gym or meeting friends for coffee would be ideal. Without the restriction of the £30 spend limit placed on contactless cards, the mobile option is more versatile. This doesn’t mean traditional payment methods are about to be obsolete though, in all the research surrounding alternative payment methods the bottom line remains the same; consumers want choice.
A key influence in the likelihood of consumer adoption is age. Millennials, who have grown up in a digital world, surrounded by rapidly changing and evolving technology, will be much more inclined to embrace mobile payments. A GFK report cites that millennials will be twice as likely to embrace mobile payments as any other generation; viewing them as a faster, more efficient and safer alternative payment method.
However, no single payment method will die out to be replaced by another. Not all consumers have the same needs or preferences, even millennials aren’t ready to let go of tradition just yet; 32% of 18-24s stated cash as their preferred payment method in research conducted by EPoS in 2015.
This generation are expected to change banking and payments as a whole, as they don’t feel the same loyalty to financial service providers that their parents do and are far less concerned about where they put their card details than any other generation. In comparison, research carried out by Synchrony financial in 2014 showed just 18% of baby boomers worldwide would be willing to adopt mobile payments compared with 37% of millennials (research from Bradinisght). Only 11% of the baby boomers felt mobile was a secure way to pay and just 22% found it easy to use.
Millennials and the higher income earners are likely to remain as the most eager adopters, although recent surveys suggest they might not be as quick to embrace the technology as predicted. When quizzed by Retail Knowledge about popular mobile payment applications and their likelihood to use them, just 3.5% of millennials said they would use them on a daily basis, 15% said contactless cards as their daily payment method. I don’t think this should be perceived as doom and gloom for mobile tech though. Mobile payments will grow rapidly, as the digitally orientated millennial generation continues to grow at a rate faster than any other, mass adoption is almost a guarantee. As a millennial, I’d certainly embrace mobile payments, but I’d do so alongside my contactless card and cash. I opt for convenience every time and apparently so do the rest of my millennial demographic; 72% voting it the most important factor in new technology.
For me, convenience is having multiple ways to pay, at multiple outlets; with a backup should any problems arise; it’s a case of the mobile forming a harmonic relationship with the wallet, rather than battling it.