There are a lot of considerations when it comes to the future of the mobile payments space, especially in regard to the evolution of mobile wallets. With dozens of options available and no clear leader, many merchants are left wondering who will emerge as the winner of the mobile wallet wars. And what will it take for mobile wallets to become the go-to payment source for consumers and reach higher consumer adoption in general? More widespread adoption will depend on a number of factors, including, unsurprisingly, millennial and generation Z preferences.
First, I want to correct a misconception. The notion that mobile wallets have no traction is a fallacy. Even if you don’t scan your smartphone at Dunkin Donuts for your daily cup of joe, you probably have used a mobile wallet. “Mobile wallet” simply means that you are carrying some form of payment information digitally, rather than physically.
From using Venmo to pay the friend who puts her card down for brunch to relying on Android Pay to purchase groceries at Trader Joe’s or clothing at Bloomingdale’s, the types of mobile payment transactions and options available have grown exponentially. This shift shows no signs of slowing down.
It’s a digital world
Recently, some states have even toyed with the idea of digital driver’s licenses (see www.cnn.com/2016/11/16/us/digital-drivers-license-trnd/index.html). Major players exist in the mobile wallet and payments space today — companies from Apple to Visa are putting serious investments behind their offerings, touting partnerships and unique feature sets with the goal of emerging ahead of the pack.
Kount’s recent Mobile Payments & Fraud Survey found that, of merchants that accept mobile payments, PayPal (48 percent), Apple Pay (48 percent) and Android Pay (38 percent) are the most preferred solutions, respectively.
So what’s next? As with any emerging technology, we will first see a proliferation, where more and more brands introduce mobile payment options to the market, followed by a collapse. We are still in the expansion stage and likely will continue to be for another 18 months to three years.
Merchants may have their favorites, but consumers will ultimately drive adoption by making a choice. This choice may be determined by brand loyalty, ease of use, superior marketing or a combination of all of these factors. Merchants who don’t accept this choice will feel the sting as consumers look elsewhere for their purchases, driving the process full circle as more merchants are forced into prioritizing and accepting consumers’ preferred methods.
Generation Z and millennials will play a huge role in the outcome of mobile wallets: Most millennials and Gen Zers, 80 percent and 76 percent, respectively, own smartphones. These groups engage with their phones most often. According to a June 2017 Bank of America survey, more than one in three millennials (39 percent) engage with their smartphones more than “anything else.” These numbers are significant and powerful.
Consumer adoption is the key
As the mobile wallets race heats up, it will leave some folks behind — and not just the mobile payment options that consumers chose not to adopt. A major issue for credit card and mobile payment companies, like Discover, Mastercard and Visa, is a loss of brand recognition. With digital payments, shoppers don’t hand over their branded physical credit cards to cashiers, which traditionally has reinforced a consumer’s connection to this brand with the purchases they make.
Now, with the information stored digitally, consumers can shop around, debate, purchase online, return and purchase again with a tap of an Apple Watch, without ever having to manually input the information, or even think about the brand name on a credit card. This may lead to cozying up of credit card companies to technology enterprises — which we are already seeing and will likely see even more of as these relationships permeate the industry.
When all is said and done, the payments landscape will have gone from many players to just a few. A few does not necessarily mean that all players will have been knocked out, but rather some of the big mobile payments options will be forced to merge — not unlike what we’ve witnessed in other large industries such as airlines.
One thing is for certain: we’ve come a long way since David Chaum started his work on cryptocurrencies in 1983, and PayPal was founded 15 years later. From here, the sky’s the limit. Biometrics could continue to take off and push mobile wallets out one day, but the driver will remain the same: consumer adoption and preferences will reign supreme.