2016: The year of the mobile wallet?

Picture this. You leave your house, keys and phone in hand. You close the door and walk out into the street. You’re meeting an old friend for breakfast, something you’ve been looking forward to for weeks. It’s not until you’re halfway to your destination that you realise that you have forgotten your wallet.

But, this isn’t the hassle it once was. Instead of facing a choice between the stress of a mad dash home and back again or the disappointment of missing out on your morning date, you keep going. It doesn’t matter, because whether you’re shopping online or in store you now mostly pay via your mobile phone – either by Apple Pay or its Android or Samsung competitors. In fact, come to think of it, maybe you never need to remember your wallet again.

Perhaps it’s time to embrace a lighter, leaner approach to life, as Gillian Hughes, VP of Corporate Sales at mobile marketing agency Veoo told ITProPortal: “More and more consumers are embracing mobile wallets, and why not? Convenience and personalisation are at the core of everything nowadays, especially where technology is concerned, so who wouldn’t want to ditch the traditional wallets that have for so long been crammed into our back pockets or handbags and instead just reach for our mobile phones?

“Mobile wallets allow us to consolidate the things that we all use on a daily basis – our cash, cards, receipts and vouchers – into the one device that most of us wouldn’t dream of leaving the house without.” Whether we’re paying for goods via a website or in a bricks and mortar store, mobile payment technology is quickly rising to the challenge.

The truth is, a wallet-less existence is not far away. We may even look back on 2016 as the time when mobile payment platforms became mainstream. It was this year that a whole host of retailers signed up to accept Apple Pay, including global giants such as Starbucks and KFC, and local operators Yorkshire Bank in the UK and Boulanger in France.

It is also the year that concerns around mobile payment security became less severe in the minds of the public. The notion of contactless payments proved its merit, for example, particularly in the UK. Figures from the UK Cards Association show that the number of payments made in the first quarter of 2016 by just waving a bank card without entering a pin far outstripped the whole of 2015. Many believe this is crucial in the move to mobile payments, as it shows that consumers are more prepared to place greater trust in technology.

Security of payments has long been a contentious issue in consumers’ minds when it comes to making changes to their spending habits. Current technology is meeting this challenge head on, however. Indeed, at the launch of Apple Pay earlier this year, Eddy Cue, Apple’s Senior Vice President of Internet Software and Services, said privacy and security are at the core of the technology: “When you’re using Apple Pay in a store, restaurant or other merchant, cashiers will no longer see your name, credit card number or security code, helping to reduce the potential for fraud.”

Android’s Pali Bhat, Director of Product Management for Android Pay, echoed this sentiment in a blog to launch its mobile payment platform in 2015: “We know how important it is to keep your personal and financial information secure, so Android Pay is supported by industry standard tokenisation. This means your real credit or debit card number isn’t sent with your payment. Instead, we’ll use a virtual account number that provides an extra layer of security.”

This concerted effort from payment platform providers is undoubtedly turning the tide. PwC predicts that by 2019 mobile payments will reach $142 billion, up from $52 billion in 2014, a figure which includes not only using a mobile phone to pay for goods in store, but also to pay for shopping online. This growth offers huge potential for businesses to form closer relationships with their customer base, while for consumers it brings a whole new level of ease to the shopping experience. And aside from the security benefits of using your mobile to make payments, the technology is rapidly becoming associated with customer loyalty.

Until now, loyalty schemes have been reliant on members using the associated cards to capture where and when spend occurs. In person, this often requires members to dig out two separate cards from their wallet – one for payment and the other for earning points. When you’re in a hurry and there’s a queue of people behind you at the till, there can be a strong urge to pay up and forget about the loyalty points. Online, it can be an equally disconnected experience.

Combine the process, however, and the whole thing suddenly becomes a lot more convenient. Why, then, when mobile payments are beginning to gain mainstream traction, are companies not doing more with mobile loyalty and incentive programmes? This is the question posed by Forbes’ customer experience writer Blake Morgan. “Mobile pay is a big opportunity to know the customer, engage with the customer and win them over through intimate and real-time offerings,” she writes.

Herein lies the potential for businesses, then. As Frederick Reichheld and Phil Schefter write in the Harvard Business Review, “contrary to the common view that web customers are fickle by nature and will flock to the next new idea, the web is actually a very sticky space in both the business-to-consumer and the business-to-business spheres.”

The loyalty experts suggest increasing customer retention rates by 5% increases profits by 25% to 95%, and that embracing the potential offered by technology is a wise move. Reichheld and Schefter add that “most of today’s on-line customers exhibit a clear proclivity toward loyalty, and web technologies, used correctly, reinforce that inherent loyalty”.

Given that repeat purchase and customer loyalty are the holy grail for most businesses, exploring the opportunities associated with mobile payments as they become more mainstream must be a focus. For us as individuals the shift towards a more streamlined approach, where we only need to use around one vehicle for payment whether shopping online or in person, could reduce friction in many aspects of our lives. And for businesses, the growth of mobile payments offers an even easier way of engaging with customers which will ultimately drive business growth.