Voice of the Industry

Mobile payments: where smartphone meets wallet

Monday 16 September 2019 09:49 CET | Editor: Melisande Mual | Voice of the industry

Markus Bergthaler of Merchant Risk Council reviews the current state of affairs in mobile payments, revealing the benefits of e-wallets and their contribution to the financial evolution

According to a February 2018 Pew Research poll, more than 95% of American adults now own a cellphone, with 77% of those phones considered smartphones. The amount of personal possessions these ubiquitous devices have replaced is nearly endless; from kitchen timers to instrument tuners, most helpful apps are only a quick tap away. With that in mind, it’s no real surprise that the smartphone’s ambitious growth has stretched into users’ wallets through mobile payments. There are a variety of reasons behind this innovation, not the least of which are security and convenience. So what can the world expect from mobile payments in the years to come?

Users still want physical options

Though it would follow that mobile payment users willing to make the digital jump would want to ditch their wallets entirely, that’s not exactly the case. A variety of reasons – your wallet doesn’t lose signal or power down, for example – drive the need to satisfy both ‘bricks’ and ‘clicks’ for payment options. Most major third-party payment apps offer debit card-like options that draw directly from the account balance: both Paypal and its acquired company Venmo, as well as Square’s well-known Cash app, offer them. Considering new smartphones almost always have biometric-linked security built right in, experts can’t shrug off the phenomena as a fear of hackers but must instead acknowledge that people simply want the option.

Mobile payments support tech orientation

At their core, mobile payments drive the financial ends of a business – they give merchants the ability to accept a popular, growing form of payment without significant infrastructure changes.

Most of the newest card-swipe checkout modules now come with a technology called NFC, or near field communication, built right in. This tech interacts with chips embedded in many new debit and credit cards, enabling the user to simply tap the card flush to the module to pay, rather than swiping. Not only is this generally a little faster than the swipe-or-insert conundrum forced on checkouts in recent years, but it also thwarts physical theft devices like card skimmers handily.

That same NFC tech extends seamlessly to smartphones embedded with NFC capability, allowing a user with the right apps in place to perform the same action with their phone. By normalising the use of a phone at checkout, the barriers to other digital interactions, such as an email signup or a digital loyalty card app, are significantly lowered in the process. This helps strengthen brand or store loyalty among a dominant demographic – millennials – that are notoriously disloyal when competitive pricing is involved.

Beyond the vendor-customer relationship

Focusing entirely on their checkout-counter benefits does mobile payments a disservice. Many important transactions are now done just before the checkout, among friends and associates. This so-called peer-to-peer payment network is almost exclusively driven by mobile payments, allowing a group out to dinner to pay their fair share, eliminating the ‘forgot my wallet’ embarrassment completely.

Group outings, complete with their quibbles over gas cost, event tickets, and even food delivery, become significantly easier as well. Curiously, the public ledger of at least one digital payment app – Venmo – has become something of an ad hoc social network, offering users the chance to describe and display exactly why money is changing hands and who’s receiving it. Punctuated with emojis, these often-cheeky notes allow inside jokes to flourish as the ledger balances, and can even give companies a footing for marketing.

Recently, for example, Chipotle used the app to drive contest signups, rewarding hundreds of users with a handful of (emoji-laden, of course) dollars in the app, ostensibly to splurge on tacos at the restaurant. In the process, the company gained a rich database of individuals that not only frequented Chipotle, but demonstrably had the app installed as well – a marketing goldmine.

As younger generations normalise sending, charging, and accepting digital money to divide debts, it’s reasonable to expect certain legacy costs to accept the payment type as well. Imagine paying rent or utilities in a shared housing arrangement with a central mobile payment app. While this is a task often divided between branded apps, the digital functionality is already in place: it wouldn’t take much work to bridge the efforts under a Venmo or Cash App-branded umbrella.

The forefront of financial evolution

While some still consider it a fringe concept, the fact of the matter is that ‘cryptocurrency’ like Bitcoin and Ethereum is garnering enough interest and volume to legislate and debate at the highest levels.

The Cash App, among other mobile peers, offers seamless conversion between cryptocurrency and usable, everyday currency. This access turns a digital concept into lunch or bill payments for the intrepid crypto investor. An essentially-digital currency, it makes perfect sense that crypto plays well with digital payment companies in terms of functionality. As use and interest grow, mobile payments are in an enviable position to offer much-needed liquidity to a financial investment often hampered by the very liquidity-resistant format that defines it.

While mobile payments aren’t a panacea for all that ails money movement, they’re an impressively effective bridge between disparate payment options and on-the-go needs. Expect this industry to grow and evolve even more as mobile capabilities do – making the ever-present smartphone even more of a must-have accessory for a busy modern lifestyle.

This editorial was first published in our Payment Methods Report 2019 – Innovations in the Way We Pay, which provides a comprehensive overview of the up-to-the-minute trends, updates, and innovations in the payments space worldwide, depicting the key developments in the way people pay.

About Markus Bergthaler

src=/images/markus-bergthaler(2).jpgMarkus oversees the development of the association’s entire programme and marketing content, including strategy, conference education, subject matter, website content, benchmarking, and online forum topics. Markus joined the MRC from Wizards of the Coast, where he led the company’s fraud department.


About Merchant Risk Council

vspace=2The Merchant Risk Council is the leading global trade association for fraud and payments professionals. The MRC provides support and education to members with proprietary benchmarking reports, whitepapers, presentations, and webinars. The MRC hosts four annual conferences in the US and Europe, as well as regional networking meetings for professionals to connect, exchange best practices, and share emerging trends.

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Keywords: mobile payments, e-wallets, MRC, payment method, NFC
Countries: World