Here we go again. A few weeks ago, PaymentEye covered a report by The Co-op that predicted mobile payments will account for 65% of all transactions in 2025. Unsurprisingly, the article drew the ire of a lot of people who disagreed. A new report from Prepaid International Forum (PIF) of UK consumers is bound to kick this conversation off again, finding that the majority of respondents under the age of 44 believe mobile will soon replace cash as their main payment method.
Resistance is futile
They argued, as most people seem to do, that cash won’t die out because it’s still alive despite all the innovations that have come and gone during its existence. Card didn’t replace cash and so on. They also argued that cash is still the most transparent way of paying because it doesn’t incur any fees and that actually many small merchants still find it too expensive to upgrade to electronic payments such as mobile or contactless.
All valid points…for now.
And that’s the crux of the story. The Co-op report wasn’t arguing that cash will disappear tomorrow, or the next day. It predicted that cash will disappear in 10 years. Now that’s a significant amount of time in anyone’s books, but more importantly, it’s a lifetime in payments and technology.
10 years is a lifetime in tech
10 years ago we didn’t have an iPhone – now we have 13, all different sizes, some of which authenticate you using your thumb and have voice-activated assistants. The first iPhone could only store 4GB worth of data, the latest iterations can store x32 that. A lot can happen in a decade.
A lot will happen in a decade.
A survey of 1,000 UK adults, published by the Prepaid International Forum (PIF), the not-for-profit body for the prepaid sector, found that currently just under a quarter of adults (24%) have used their mobile phone to make payments, with 12% doing so on a regular basis.
Exactly a third say that although they do not currently use mobile payments, they are open to the idea in the future. So that leaves 43% who have said they are not and will not use mobile payments. By no means an insignificant number, but also not a majority.
In terms of age, unsurprisingly the younger age groups were more open to newer methods of payments. Of 18 to 24 year olds questioned, just under half (49%) had used mobile payments, as had a third (33%) of 25 to 34 year olds – uptake then falls away sharply amongst people over the age of 55.
Where the survey gets interesting is when it starts asking why people use mobile payments or what would make them want to.
Extra features will prove key
Cash’s advantage is also its disadvantage. People like to use cash because it’s simple; you don’t need to charge a phone, remember a PIN or worry about fees – cash is cash. However, that means it can’t offer extra protection such as biometrics; can’t keep track of cash-flow or travel further than your extended arm. People are growing accustomed to all these nifty features.
These features that offer greater convenience and extra functions mean that the majority of consumers under the age of 44 expect mobiles to replace cash and plastic as their main means of making payments within the next few years.
“Consumers questioned in the study said that the main reasons for making the switch were being able to see real-time account and balance information (47% of consumers), as well as the greater convenience of being able to carry just their phone (39%),” said the report.
The last point is particularly telling. The greater convenience of being able to just carry their phone. We try to cram everything into our phones because the phone has become our most important asset. It keeps us in touch with our closest friends through Whatsapp and Facebook, it keeps us informed about what’s happening around us through news services and Twitter.
Convenience conforms to the laws of physics in that it will usually take the path of least resistance. If people already use phones for everything else, then they are very likely to use it for payments also.
“The innovation in mobile payments has led to many consumers using their mobile phone to pay – we see daily use in public transport and in coffee shops, for example. While uptake to date has been steady, many people are gaining confidence in mobile payments and like the convenience and extra functions that come as part of the package,” said Alastair Graham, spokesperson for PIF.
“Retailers are encouraging usage with discounts and special deals, and innovations such as immediate peer-to-peer money transfers are opening people’s eyes to the potential improvements to how they currently manage their cash.
“We’re all used to the triple-check for keys, phone and wallet before we leave the house. By making that just a double-check, mobile phones are looking a good bet to win the day – especially with younger consumers who feel less loyalty to the plastic cards in their wallet.”
Obstacles must be addressed
However, proponents of mobile payments need to remember that obstacles need to be overcome first. The main potential potholes include levels of acceptance and the legitimate concern about fees.
In ten years’ time, whilst cash probably won’t be eliminated completely (although should one really use the argument of the shadow economy as a reason for cash to carry on?) but it will almost certainly be displaced by contactless payments be it in the form of cards or mobile if key obstacles such as the ones above are addressed sufficiently.
Nine out of ten consumers use their smartphones more than any other device, and consumers would also prefer to use biometrics over PINs - with fingerprints being the preferred method, according to a new Mastercard survey.
Fresh from its $4.5bn IPO, Nordic payments processor Nets has picked Spire as its partner to help with the physical roll out of mobile payments for Dankort customers.
Square has introduced a new update to its contactless and chip readers that reduces transaction speed to 4.2 seconds.
It seems laptops are about to catch the biometric fever as PayPal, Intel, Lenovo and Synaptics are collaborating to introduce FIDO-enabled embedded fingerprint solution to PCs.