Think about last weekend. Like millions of others, you will probably have visited a hole-in-wall for cash to pay for low-value items. An estimated 21 billion such cash payments are made each year, 80 per cent of which are below £10.
The sheer scale of these transactions requires the creation, transportation, collection and, ultimately, the destruction of about a billion bank notes annually, with a huge attendant environmental impact, all of which is paid for by the taxpayer.
But all that could be about to change. According to the Payments Council, by 2018, the volume of cash payments is projected to fall by 20 per cent, after adjusting for inflation. And in five years, cash is likely to make up less than half of UK transactions (45 per cent) for the first time. Welcome to the mobile economy.
You may already be one of the users of Barclays’ “wave and pay” system that allows payments to be made without chip and PIN, or perhaps make mobile payments (m-payments) with Barclays’ Pingit, which allows up to £750 to be sent via a smartphone? Or your favoured option could be the Orange Quick Tap initiative with Everything Everywhere and Barclaycard, which offers UK NFC (near field communication) payments of under £15 at retailers such as Pret A Manger, EAT, Subway and McDonald’s?
Well, imagine if you could make these payments without cash by simply using your smartphone as a wallet? That is the promise of NFC, which allows your phone to wirelessly communicate with a retailer’s till or other phone users. And NFC is only one of a range of m-payment systems that now offer you contactless payment options that together are developing the digital economy, with your smartphone or tablet PC at its heart.
“Consumer behaviour is beginning to shift,” says Mary Carol Harris, vice president and head of mobile strategic alliances at Visa Europe. “Contactless cards issuance and acceptance technology are not only providing the infrastructure for future mobile NFC services, they are easing consumers into the habit of using a contactless payments device to pay for goods rather than using cash.”
From browsing goods to checkout, deals and offers, the opportunity is enormous for consumers, retailers and financial institutions
According to Juniper Research, smartphone shipments will increase by 40 per cent this year with m-payments expected to exceed $180 billion (£114 billion) by 2017. “NFC technology is transforming mobile phones into payment devices that will change the way people live, work and play,” says Niki Manby, Visa’s head of emerging products in Asia Pacific, Central Europe, the Middle East and Africa.
While Jim Wadsworth, head of mobile and digital payment at Accourt, adds that NFC is about more than just payments. “NFC enables other services too, such as secure access control, the provision of information via ‘smart posters’, and joins together digital social media with the real world – for example, it will enable users to ‘like’ and share anything they see in the real world where it has an NFC Facebook tag,” he says.
The use of barcode and QR code scanners to quickly capture product information is also on the rise. In addition, m-commerce is delivering a level of personalisation never seen before. Retailers can now detect when a past customer walks into their store – a coffee shop for instance – and know what they ordered last time. Some US stores are even allowing pre-ordering, so that as a customer hurries towards a café’s doors, their latte and muffin are already being prepared.
And with more of us storing our digital lives online in the cloud, it was bound not to be too long before payment systems moved there too. A good example is Google’s Wallet, which had some limitations at its launch (not least, a lack of compatibility with smartphone handset models). Now that Google has moved its payment platform to cloud, these have been rectified. Cloud-based solutions, where payment information is held centrally, mean that debit or credit cards can now be used over multiple devices.
Changing handsets or buying a new tablet PC? No problem, as you can keep on making purchases with your existing payment information. This kind of seamless interface between your preferred payment method, the cloud and the mobile device in your pocket is the future of m-payments and m-transactions.
“Retailers’ e-commerce teams are buying into m-commerce with app and enhanced websites, and their retail store teams are broadly piloting or rolling out contactless payment to work with the cards that are being distributed by the banks as a standard on credit and debit cards,” says Neil Garner, founder and chief executive of Proxama. “They are installing contactless payment terminals as part of their natural upgrade plans. This is all happening today, with M&S and The Co-op among those who have announced their intentions in this area.”
However, Richard Johnson, group strategy director of Monitise, cautions that too many individual solutions will hinder customer adoption. “This space is never going to flourish if it’s full of a plethora of closed-loop schemes where you have to have to open a special account, use a certain device or shop in only one type of store or where merchants look at solutions individually,” he says. “In the long run, consumers are going to demand inter-operability; payments have got to be seamless and they need to ‘just work’.”
If banks, payments providers and businesses get it right, then Ms Harris of Visa Europe predicts that, within a decade, “an entirely new shopping experience” will be created. She says: “From browsing goods to checkout, deals and offers, the opportunity is enormous for consumers, retailers and financial institutions around the world.”
Payment platforms, such as PayPal Mobile, Amazon Payments, Google Wallet, MasterCard’s MoneySpend and, later this year, V.me from Visa are creating a vibrant and rapidly evolving ecosystem of payment options.
For consumers the choice can be confusing, but expect the larger players, such as PayPal, the banks and credit card providers, to remain at the forefront, with new payment providers, like Twitter co-founder Jack Dorsey’s Square, to offer systems that are tailored for phone and tablet users. What seems certain, however, is that the future of payments will be increasingly mobile.
SMARTPHONES
Will chip bear fruit for Apple?
Until recently, the smart money has been on Apple incorporating a chip in its next iPhone for short-range wireless transactions, but latest reports may have cast doubt on such speculation, writes Dave Howell
At the moment NFC (near field communication) has failed to set the world alight, at least outside Japan. In the UK and US, all eyes remain on Apple, who some predict will make the next generation iPhone an NFC-enabled device.
Retailers have already adopted the iPad into their stores across the US as fast and efficient next generation tills. NFC would be the next logical step to take, as the availability of a mass-market smartphone with NFC capability would kickstart the NFC market as a whole, and drive retailers and the payment processing service providers to develop their systems rapidly.
Meanwhile, for consumers, an NFC-enabled iPhone would finally deliver an electronic wallet into their hands. If “wave and pay” from Barclays was a revelation to shoppers, simply moving their smartphone near a pay point will be nothing short of a revelation.
Retailers have already adopted the iPad into their stores across the US as fast and efficient next generation tills
“Mobile technology has long been a revolutionary force in our lives and NFC-enabled devices, such as the Galaxy S III, will fundamentally change the way we pay,” says Sandra Alzetta, senior vice president of mobile at Visa Euope. “The future is mobile and cash usage will continue to decline, as people use their devices to manage their money, shop and pay.”
SCAN AND BUY
Quick response to mobile technology will boost sales
The digital economy means linking the traditional retail environment with customers who want to shop on the move with their smartphone or tablet. Many businesses are now using these platforms for interactive ads and even to drive direct purchasing.
Think about the last time you stood in a store and would have loved to access more information about an item on the shelf. Barcodes evolved into QR codes, which personal devices can scan for more information. Now SnapTags are offering brand owners a new way to place their company’s branding within a code which smartphones can scan.
Publishing is also embracing the digital economy. All the major publishers have an iPad edition of their leading titles. But this doesn’t mean that print is dead – far from it. Publications are using QR codes to offer readers an interactive experience right on the page.
Augmented reality, meanwhile, looks set to become even more creative. New business services, such as Crossfy, don’t even need special codes to be printed. The publisher decides which images in their publications will be interactive. When a smartphone sees these images, the reader will see additional information, move to the brand’s website or see purchasing information for the product or service.
