Apple Pay is only the start: Mobile wallets are about to take off

Iain Regan

It’s here folks. Well, in the US at least. Yesterday, a string of American retailers (including Bloomingdale’s, Foot Locker and Toys R Us) started accepting Apple Pay transactions, allowing consumers to make payments through credit card information stored on the new iPhone.

Exciting stuff, but haven’t people been predicting the end of cash for some years now? Despite new developments like Apple Pay, talk of a “mobile wallet” revolution (with smartphones becoming the primary means of payment) has so far failed to translate into a mass movement. Is this set to change?

Analysts at Transparency Market Research confidently predict that the global mobile wallet market will be worth $1.6bn (£991m) by 2018. Yet the UK Payments Council reported at the beginning of June that 52 per cent of all payments made last year were in cash.

Our own survey, carried out by YouGov, showed that only 22 per cent of British mobile phone owners would be likely to use a mobile wallet. And 80 per cent expressed concerns over the security of personal bank details. Similar misgivings have been echoed by studies carried out in other developed markets.

Perhaps we should look beyond our shores. Standard Chartered launched a mobile wallet with Globe Telecom in the Philippines this summer, tapping into the $25bn sent back to the country from workers abroad each year. And Nairobi’s M-Pesa service, which enables Kenyans to deposit, withdraw and transfer money using a mobile phone, is being made available to Vodafone customers in Romania.

Advances in biometric security tools are likely to increase UK consumers’ confidence in mobile payments, driving adoption in the long term. But we can take solace in the meantime from the strict spending limits on contactless technology, which should further reduce security risks. Visa Europe for example, which has a limit of £20, says the technology is mainly used for small transactions. Its average spend in 2013 was just £6.09.

And the involvement of big name companies looks set to increase adoption even further. Apple’s partnership with Visa, MasterCard and American Express for Apple Pay should boost the technology’s legitimacy in the eyes of consumers. Transport for London has announced that cards issued by the same three providers will be accepted as contactless payment for rail journeys. EE customers, meanwhile, can pay with near-field communication-enabled Android handsets through the Cash on Tap app.

And Amazon has launched its own mobile wallet app, which comes pre-installed on its new Fire handset. It joins Visa, which is expanding its digital wallet into eight new regions around Europe by the end of the year, in a €200m (£158m) investment.

It is the involvement of well-known players like this – and a rollout of more useful functions across everyday services that people really like to use – that will see the mobile wallet take off. So don’t be surprised if, within a year, you’re swiping your smartphone at the self-service checkout to buy your lunchtime sandwich, and perhaps a whole lot more.

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