Using smartphones to make financial transactions will be a normal part of everyday life by 2020, new research suggests.
Pew Research Center Study released its study data April 17 (see overview).
For their report “The Future of Money: Smartphone swiping in the mobile age,” Pew researchers put two scenarios before 1,021 experts and asked them to agree with one or the other, and provide explanation to allow for partial agreement and gray areas. They conducted the research from Aug. 28 to Oct. 31 last year.
Sixty-five percent of participants agreed that by 2020 most individuals will trust smartphones and tablets to handle monetary transactions online and in stores and that “cash and credit cards will have mostly disappeared from many of the transactions that occur in advanced countries.”
One analyst believes Pew’s estimate is conservative. Indeed, the transition could happen sooner, Gil Luria, managing director of equity research for computer services and financial technology for Wedbush Securities, tells PaymentsSource.
“I think in a five-year timeframe we’re going to have a very large part of the population adopt this type of payment, at least partially,” he says.
The digital-wallet features–smartphone storage of credit card, loyalty program and coupon information–are too compelling for consumers to ignore, Luria says.
Google Inc., Isis, PayPal Inc. and Visa Inc. all have or are working on wallet platforms, and the Pew study cites analyst speculation that Apple Inc. will launch one as well.
The main challenge slowing mobile-wallet adoption continues to be the many partners necessary to make wallets work–banks, card companies and mobile carriers, for instance, Luria says.
PayPal has an advantage in this regard because it operates a “closed system,” he says.
“PayPal has customer relations, it has merchant relationships, it has a network, and so it doesn’t need to coordinate as many different parties,” Luria says. “It doesn’t need to rely on a specific technology (and) doesn’t need to tie itself to one carrier.”
Also compelling is that smartphones offer robust payment security, with at least two ways to authenticate payments, Luria says. Location-based services and encryption technology also will boost security, he says.
“There’ll be a transition period where there’ll be a cat-and-mouse game where the crooks figure something out and the loopholes will be closed,” he says. “But if everybody gets through that transition period without losing customer confidence and merchant confidence, it will lead to far more secure transactions.”
Security with mobile payments is assumed, Rick Oglesby, group senior analyst at Aite, tells PaymentsSource. No developer would go to market without it, so its strength is not a factor in consumer adoption of mobile payments, he says.
Adoption depends on the utility, Oglesby says.
“Consumers don’t usually adopt payment products or services because they need a new one, at least not in droves,” Oglesby says. “They adopt new products and are more than happy to use whatever payment vehicles can enable them to buy those new products.”
PayPal didn’t become successful because it had a great payment scheme; it became successful because it was an enabler of eBay payments. Consumers were looking to use eBay, and PayPal was a way to do it, Oglesby says.
Oglesby doesn’t see widespread adoption of mobile payments occurring as quickly as Luria does, and he doesn’t see card payments becoming obsolete by 2020.
Moreover, the barriers to mainstream mobile-payment use are not consumer-based, Oglesby says.
“Our current infrastructure isn’t very flexible from a payment perspective, which really diminishes your ability to experiment and find the right combinations and right [products or services] for consumers and merchants to get engaged,” he says. “It’s a very difficult market to penetrate because there’s so many logistics in the way.”
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