Mobile wallets – still waiting for the breakthrough moment

30 SEP 2014

BLOG: The mobile phone has become the remote control to so much in our lives – from emailing work colleagues to Skyping with our loved ones to listening to our favourite music.

But how many of us have actually swiped our phone to buy something in store? For years now, the promise of a so-called ‘mobile wallet’ has been talked about but not yet become a reality. Why is this when Transparency Market Research predicts the global mobile wallet market will be worth $1.6 billion by 2018?

The Payments Council reported at the beginning of June this year that 52 per cent of all payments made in the UK last year were in cash. And this is despite the inexorable rise of the smartphone and tablet, which are the ultimate gateway to this new era of seamless digital transactions. Perhaps this fondness for old-school cash is partly rooted in the media’s drip-feed of stories about security threats? People’s biggest fear appears to be the prospect that if they use these payment technologies their money will not be safe.

Our own survey carried out by YouGov and published last autumn showed less than a quarter (22 per cent) of British mobile phone owners would be likely to use a mobile wallet to make payments. Fear that personal bank details would not be secure was the reason given by the 80 per cent of respondents that won’t use a mobile wallet. Similar concerns have been echoed in a PricewaterhouseCoopers-commissioned survey in the US, as well as  the Australian Mobility Banking Program survey.  In all likelihood, we should be prepared for slow, cautious and incremental growth in the public use of the mobile wallet.

But there is plenty that telcos and banks can do to advance the take-up of mobile wallets and dispel these misgivings by shining a light on the constantly evolving and improving technology, and explaining more clearly the benefits and convenience of using such a service.

One of the architectures set to boost mobile near field communication (NFC) technology, and the widespread adoption of the mobile wallet in the US, is host card emulation (HCE).

Advances in biometric tools to enhance security and speed up transactions are also likely to help drive the adoption of the mobile wallet by providing peace of mind to users.

Consumers should also gain reassurance from the strict spending limits on contactless technology to further reduce security risks. Visa Europe, for example, with a limit of £20, says the technology is mainly used for small transactions, and, according to its figures, the average spend in 2013 was just £6.09.

Slowly but surely mobile payments technology is gaining traction and, when experienced, is very positive for users. It is reported that the Hungarian Mobile Wallet Association (HMWA) is preparing for a full-scale commercial rollout following a 12-month test phase. During this phase, active ‘MobilTárca’ users made 41,000 payment and more than 4,000 loyalty point transactions, spending more than €385,000 across more than 20 countries. The vast majority of those taking part in the trial (85 per cent) said they would use the wallet in the commercial phase and a similar number said they would look out for wallet compatibility when buying their next smartphone. Consequently, the HMWA estimates around 350,000 – 400,000 people are likely to use the service in the first phase of the commercial rollout.

In other quarters there are further signs that the tide is turning. In the US in May, Softcard (formerly Isis) reported that its mobile wallet had doubled its activations to 20,000 a day when compared to the month before. And the announcement of Apple Pay gives a huge potential boost to the mobile wallet.

Japan is of course already a huge success story, where osaifu-keitai or mobile wallets are used at hundreds of thousands of retail outlets across the country, a network that has taken several years to build. NTT Docomo, the country’s largest phone carrier, said that about one third of its roughly 65 million subscribers were using its mobile payments service. The service, called iD, is used for payments with taxis, vending machines or even paying to get on the subway.

The UK is currently stuck in a classic catch-22. Even if people want to use a mobile wallet service most retailers don’t accept the technology and are not interested in installing new payment software and hardware unless a large swathe of shoppers are using the service. However, it is only a matter of time before this deadlock is broken and UK consumers think nothing of swiping their mobile phone to pay for a full tank of petrol or coffee-on-the-go. The day when we will be able to leave the house with just our mobile phone is fast approaching.

Iain Regan, EVP – Sales & Marketing, Firstsource Solutions 

The editorial views expressed in this article are solely those of the author(s) and will not necessarily reflect the views of the GSMA, its Members or Associate Members.