Are mobile wallets the future of payments?

By contactless card machine provider, Handepay

Smartphones are an integral part of everyday life.

The vast majority (92%) of UK adults own a smartphone, and 95% admit to using it daily.

But as well as connecting people and opening up access to information to anyone with a mobile or WiFi connection, smartphone popularity has given rise to a new phenomenon in business – mobile payments.

Mobile payments are the next evolution of contactless payments, first started using debit and credit cards.

These types of payments work by linking a customer’s payment details (bank details) to a mobile wallet app like Apple Pay, Google Pay and Samsung pay, for example, on a smartphone or other smart devices, like a watch or tablet.

Rather than using their debit or credit card to make a payment, customers simply open the app on their smart device and touch it against the payment machine (just as they would a contactless card payment), and the payment goes through.

And they’re proving popular with customers.

More than a quarter of smartphone users in the UK have adopted mobile payments.

The number of Apple Pay users alone grew by 66 million in 2020, while six in 10 customers used Apple Pay for in-store transactions in 2021.

Why have mobile payments become so popular?

While mobile payments work much the same way as contactless card payments, using near-field communication (NFC) to connect and send payment details, why have they become so popular among customers?

1 – They’re convenient

While contactless credit and debit cards are incredibly convenient compared to cash and even entering a PIN, they still require customers to carry their cards around. Typically people will have them in a wallet because the cards themselves are slim and could easily be lost.

But this usually means carrying a bulky wallet and is just something else to take out.

On the other hand, everyone carries their smartphone with them pretty much all the time.

This makes mobile payments more convenient because it’s one less thing to carry, but customers still can pay for things.

These mobile wallets can sync customers’ other information like loyalty cards, store cards, discount codes and QR codes into one place so they can access everything from one app.

2 – They’re secure (and perceived to be more secure)

Both contactless card payments and mobile payments use high-level encryption to secure the payment information sent during a transaction.

This makes them both highly secure.

But mobile payments are perceived to be more secure because they usually need the customer’s biometric information (either a fingerprint or face scan) to be authorised.

If someone loses their smartphone, they at least know it’s harder to get into the device and next to impossible to pay using contactless without that biometric data.

Contactless cards do have a slight risk that if you lose them, there’s a chance contactless payments could be authorised until you report the card lost or stolen (although there’s always avenues to recover any money that’s spent using your card if it’s stolen)

3 – Mobile payments have higher spending limits

Although increasing the contactless card spending limit to £100 back in October 2021 made contactless more accessible and useful, most mobile wallets have no spending limits per transaction, so you can continue to use contactless payments for much bigger value purchases.

From a convenience standpoint, this makes mobile payments a much more attractive option for customers.

4 – They’re better for loyalty schemes

Because mobile wallets can sync payment details and customer loyalty information within the same place, it’s easy for businesses to run bonus schemes and loyalty competitions for customers using mobile payments.

This encourages customers and incentivises them to use their mobile wallet more than their debit or credit card.

5 – Easy to track spending history

Another reason mobile payments are popular with consumers is that these mobile payment apps provide a simple and easy-to-use spend tracker so users can easily see and filter where they’ve been spending their money.

Linking this data to budget planners makes it much easier for consumers to plan and budget their spending.

It also makes it easier for customers to see what they’re spending their money on by category (like shopping or food and drink) at a glance to decide where to cut back.

With the cost of living rising and people becoming more aware of the need to track their spending, these integrated apps are beneficial.

Young people dictating the future of contactless payments

If there was any remaining doubt that mobile is the future of payments, you only need to look at how younger shoppers are already embracing the technology.

While many older shoppers embraced contactless cards in the last few years because of Covid-19, younger shoppers have already moved on.

In 2021, 65% of young millennials used a digital wallet.

Another study found that 77% of 18-24-year-olds would now regularly leave home without their wallet, opting instead to pay using their smartphone and a mobile wallet.

So with younger people already moving towards mobile payments and improvements to this technology being made all the time, the future of payments is most definitely mobile.

And it’s up to businesses to adapt to how these customers want to pay as they become the majority in the consumer landscape.