Are we about to witness the end of the physical money era? A logical consequence of innovations that are already underway, payments are going to be even more digitised in the near future, and mobile devices will ease the way. Digital wallets, a term that includes services like Apple Pay, Google Wallet, PayPal, Square Cash and Snapcash, are powered by software that lets people make transactions electronically. So purchasing a camera online, ordering books from Amazon, or using your smartphone to pick up a top from a high street store are all facilitated by recognised wallet tech. Instead of digging out this credit card, that loyalty card or this transit pass, the details are all stored in your wallet, so just a press of your phone to the reader will suffice. Online purchases become simpler, clients are rewarded and retained through nifty mobile applications, and important documents can be stored just like in a traditional wallet.
A slow transaction
Techvibes points to two telling stats out of the US: first, a Federal Reserve Board report from early last year indicates that 43% of mobile users used their phone to make at least one payment, which is 10% higher than the figure two years before; and second, a prediction from Business Insider has $503 billion worth of payments made via smartphones by 2020. These numbers, albeit impressive given how recent the technology really is, stop short of casting doubt on the leading role of more traditional payment methods such as credit cards and cash.
The shift to digital wallets has met a little resistance, both from retailers slow to adopt the appropriate technology and from the scepticism of many users. The IEEE’s most recent Global Cybersecurity Survey found that 48% of the respondents cited payment information hacks as the biggest concern when it comes to buying goods with their mobile, whereas 31% are most afraid that their service providers will start processing unauthorized payments.
Increasing levels of trust
Despite some misgivings, the advantages aren’t really in question. Digital wallets are faster, usually cheaper and more environmentally friendly than the alternatives. They help authorities track transactions, which supports the fight against corruption and money laundering. And security innovations may serve to put the public’s mind at ease. Tokenisation, a process that replaces users’ actual financial PINs and codes with randomly generated numbers, allows them to process payments without sharing even typical personal information such as their credit card number with third parties. Increased security measures like this appear to be enhancing consumer trust. According to the IEEE survey, 70% think that mobile payment security will overtake cash and credit cards by no later than 2030.