Every year we hear bold new predictions about mobile wallet, and every year those predictions fall flat. So, with some trepidation, we ask: is this the year when mobile payments finally take off?A lot of pieces of the puzzle are finally in place:
NFC and tokenization have been accepted as the standard for payment tech (QR is fighting a losing battle although some heavyweights still back it)
Networks (Visa, MasterCard etc.) have managed to co-opt the mobile revolution and avoid the threat of disruption
Credit card providers see the opportunity to drive growth
EMV (chip and PIN) standards have forced retailers to upgrade payment terminals which now are NFC enabled
Mobile service providers have given up their bid to control the payments business
And most importantly, consumers are increasingly comfortable with the idea of using smartphones to pay for purchases-they are at a similar point in the adoption curve as they were with online payments a decade and half ago
So, yes, mobile payments will grow in the next 12-18 months. And smartphones will continue to drive that growth. But the big news is that mobile wallets are poised to get a major boost from the proliferation of wearables. In our latest Consumer Pulse study, we surveyed nearly 2,000 smartphone owners about mobile wallets and wearables awareness and habits. Here are a few of the key takeaways:
You want to put that chip where?
Formerly confined to fitness trackers, and to some extent smartwatches, wearables are still emerging for the average consumer. Currently, about 60% of the market is at least somewhat familiar with wearables in the generic sense. And with the pace of technology, this is a low barrier. A new product that fulfills a need (perceived or not) can gain attention in the flash of a Snapchat.
As the wearables category broadens to include trackers, shirts, bands and other devices that are an extension of the wearer, mobile payments are a natural offshoot. In fact, beyond table stakes (battery life, pedometers etc.) 40% of likely wearable buyers want built-in mobile wallet functionality. Our data shows that wearable and mobile wallet adoption is symbiotic in nature. A majority of those looking to buy wearables say having mobile wallet functionality would bring them closer to the purchase decision. And a similar majority say they would use mobile wallets a lot more if it were a part of their wearable functionality. Looks like a win-win.
Good news for smartphone makers
Although at present wearables are primarily associated with fitness trackers (smartwatches are perceived a bit differently though that line is blurring really fast); many see wearables as an extension of the smartphone category – and expect smartphone brands to lead the wearables march. While the top players are as expected: Apple and Samsung, the door is still wide open for a variety of players like Google, Microsoft, Fitbit, Sony, Nike, and LG. And perhaps the best news is that, in general, buyers expect highly functional wearables to cost between $175- $275. Of course, there are always those who are willing to splurge north of $400.
What about payment companies?
In all this excitement around wearables and mobile payments we can’t forget the critical role of payment companies. As mentioned previously, networks and credit card companies have a critical role to play. At the moment, usage data indicates two things: one, usage of credit cards in a mobile first world mimic that in the physical world – card usage behavior (primary card, share of wallet) has not changed. Two, checking accounts, debit cards, PayPal have a large presence on mobile wallets. We continue to maintain that mobile payments present an opportunity to shake up some of the existing stalemates in the industry and at present it seems like no single player has a decisive advantage.
What does all this mean?
Depending on how narrow or widely mobile payments are defined, the trillion+ dollar industry is fluid at the moment, with everyone trying to get a large piece of the pie. From a purely consumer-centric perspective, the barriers are lifting, the options are expanding and before you know it a majority of consumers will have access to mobile wallets through smartphones or wearables. The key to winning them over will be to make the experience natural and seamless. The day someone can put together an experience where my jogging shirt tells me to run faster between miles 5 and 7 and then pays for my smoothie is the day wearables would truly achieve their potential. I’m betting that the day is not far away.
Abe is a payment-tech and ecommerce Project Lead, Strategist, and CrossFit enthusiast.