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The cashless society: who will lead the foray?

Mobile payment is being adopted all over the world in different ways, whether it is via SMS transactional payments, direct mobile billing, mobile web payments (WAP), mobile banking apps or contactless NFC. In developing countries mobile payment solutions have been used successfully as a way of bringing financial services to the “unbanked” population, but widespread consumer adoption has not yet happened in any market – developed or developing – and is by no means guaranteed. So what part might mobile payment have as part of a cashless society of the future?

As with anything new, people need to understand the benefits before they’ll move to the next big thing. For payments, this is even more important. Firstly, consumers in the developed world have many established ways of paying for goods and services and without a clear consumer benefit they will be slow to adopt new ways to pay, if they do at all. The UK is one of the most advanced payment markets globally, but it took 16 years for the majority of consumers to use debit cards regularly.

Secondly, the benefits have to be more compelling than convenience. Integrating payment with loyalty rewards and discount vouchers with personalized, context-driven rewards certainly meets the criteria. Add technologies that provide 100% confidence and reassurance that payment and personal details are secure, and you have reasons for even the most reluctant consumer to adopt mobile wallet.

The rapidly changing retail landscape will also be a key influencing factor. In a number of markets retailers already offer payment solutions with integrated banking services and reward schemes. Providing payment within a shopping app allows the retailer to fine-tune offers and rewards, creating closely targeted, customized products and experiences. Combined with the potential rise of proximity payment solutions (check-in and out via the app) and the end of the traditional “checkout” part of the physical retail journey, retailer closed-loop solutions offer strong competition to broader based digital wallets.

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Our analyst Alexander Zeh says:

“Apple Pay’s entry to the market could be a genuine game-changer with its upmarket early adopter base, focus on customer experience, existing e-commerce platforms and strong brand. Apple has overcome the barriers of handset fragmentation and mobile operators wanting to facilitate the transaction. Simultaneously, Samsung has been developing a response to Apple Pay with PayPal, maximizing the security strengths of handset’s fingerprint scanners to authorize payments. But as banks and payment providers gear up to launch real-time solutions within the secure hub of mobile banking, we still cannot rule them out of the market. They are trusted globally by billions of consumers and businesses for their security and payment system resilience.”

For more information about mobile payments, contact Alexander Zeh at alexander.zeh@gfk.com.

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