Finance / Digital wallets: are we there yet?

Digital wallets: are we there yet?

When mobile wallets were first introduced, the predictions were that the days of cash and credit cards were numbered and the new technology was going to revolutionise our lives.

Indeed, a recent study by MasterCard – which analysed more than 3.5 million conversations from the past year across different social media channels such as Twitter, Facebook, Instagram and Weibo – concluded that the use of digital wallets dominated 75 per cent of the tracked discussions.

“This year’s study notes a change in the level of interest for new ways to shop and pay that only a few years ago would have seemed far fetched,” says Marcy Cohen, Vice President of digital communications at MasterCard.

Ben Wood, mobile and wireless industry Analyst at CCS Insight agrees, saying that mobile wallets such as Apple Pay, Android Pay and Samsung Pay will continue to expand their presence in the market due to their simplicity, security and reliability.

“Mobile wallets are just a fantastically convenient way to pay. It’s what people refer to as frictionless – there is no need to reach for your wallet or your handbag,” says Wood. “If you have a smartwatch on your wrist or your phone in your pocket, you can just get it out and make a payment, and on top of that you have the added security – you have your biometric data stored, you’ve got your fingerprint to confirm that the payment is genuine.”

However, some critics point out that, even though people are aware of the benefits that mobile wallets bring, they are still reluctant to use the new technology, preferring to stick to traditional payment methods such as cash and credit cards.

“There is always resistance to new technology – it’s the same way that taxi drivers want to stop Uber,” explains Wood. “Some banks are resistant as well, as for them it’s ultimately about the loss of direct control of the customer. So even though the payment ultimately leaves from an account at their bank, with Apple Pay for instance, they feel they are losing control of the transaction”.

 

And not only control. Another issue is the fee that banks have to pay to mobile wallet providers. Apple, for instance, has recently won a major court battle against several major banks in Australia, who were trying to negotiate with the giant to allow iPhone users to make payments with their own integrated digital wallets instead of using Apple Pay, therefore avoiding Apple’s fees.

Apple’s rival Google, which is behind Android Pay, tells Business Reporter it is trying a different approach to get more banks on board. “We are pleased with the progress we are making, but it’s still a long way to go,” says spokesperson Andrew Brennan. “We want to make it easy – you always have your phone with you, it’s just easy to press a button. We support a number of banks and we are adding more banks.”

Banks are not the only obstacles on the way to digital wallets’ conquering the world. As Wood believes, smartphones themselves are often not compatible with advanced technology: “It’s very easy for people in the technology industry to get excited about it, because they’ve got high-end phones that support the technology you need for fingerprint sensors, for example,” he points out. “However, there is only a certain percent of the population at the moment who have those latest phone models.”

Not all places are geared for accepting mobile payments, and even if they are, sometimes those payments take longer to process. “Payments with some of the phones on the London Underground are slightly slower than using an Oyster Card, and it can be rather frustrating,” says Wood. However, he adds, that situation will soon change as more and more people adopt more advanced and capable smartphones.

But even if you overcome all the challenges mentioned above, there is still one major one for digital wallet providers to solve: how do you access your cash when your phone’s battery runs out? At least one digital wallet provider has already solved that problem by introducing the Kerv ring. It looks just like a normal ring and you wear it as one, but you can also pay with it by tapping it on a contactless payment machine, just as you would with your phone or contactless bank card.

“It’s a very slick solution – you don’t need the battery all the time, it’s waterproof, so you can even swim with it,” says Wood. “It’s a fantastic way to make payments on holiday.”

Wood thinks that ultimately, the required technology is in its infancy and can only improve – and that digital wallets will soon be a common and practical way of making payments for most people. “I think anyone who thinks that cash will cease to exist anytime soon are not being realistic. Cash will continue to exist for a very long time, but alternative payment methods will just make it easier for people to have options in how they prefer to pay,” Wood concludes.