The fascinating evolution of mobile payments continues. While the pandemic may have served as a launchpad for increased usage, consumer behaviors tell us that the trend is here to stay.

Mobile payments have come a long way since they were first introduced to consumers. The first iteration involved using a traditional web browser, simply formatted — often poorly — for a smaller screen. Payment details were input manually, identical to purchasing from a desktop. Since then, dedicated mobile sites and even individual apps have transformed the E-commerce experience.

Despite only existing for a few years, mobile payments are beginning to dominate the commerce space. Data from Statista shows that nearly half of consumers from ages 18-54 use mobile wallets, with millennials (aged 24-39) the most mobile-friendly group at 46% penetration. Looking more broadly, Mordor Intelligence reports that the mobile payments market has a compound annual growth rate of 24.5% and is forecast to reach $5.4 trillion by 2026.

With such explosive growth on a global scale, experts believe that this upward trajectory will continue. The more that consumers adopt the technology, the more incentive there is for businesses to incorporate mobile-payment support into their platforms. The increase in mobile payment accessibility will further encourage more consumers to participate. Over time, this will help to create habitual use and encourage a mobile-first approach to payments — thanks to the unparalleled convenience offered.

Convenience is key. Although mobile payments proliferated during the pandemic due to hygiene and health concerns, many consumers are choosing to purchase through mobile even as those concerns abate. The more recent introduction of mobile wallets and contactless payments has digitized in-person payments, promising increased opportunities for mobile payments.

The Mobile Wallet Craze

Mobile wallet use has accelerated in the last 18 months. Mobile wallets are supported by most smartphones. One of the key reasons for their increased popularity has been their availability on every kind of smartphone — a key factor in their rising popularity. Apple Pay, Google Pay, and Samsung Pay applications ensure that all consumers can get up and running, with a mobile wallet, often by simply scanning their credit card with their phone camera. Every point-of-sale (POS) system that can support mobile payments is compatible with all these applications, removing the need for merchants to operate separate systems for each brand of phone.

Mobile wallets still require the user to be in physical proximity to the checkout, as they are scanned using radio-frequency identification (RFID), such as near-field communication (NFC), which works over short distances. This means that mobile wallets are not as commonly used for E-commerce, although it is possible to use saved card data in the wallet for online checkout. Instead, mobile wallets are increasingly taking the place of in-store cash and card payments.

This is not how many people imagine purchasing via mobile; the assumption is mobile is only useful when purchasing remotely. In fact, the use of mobile when in-store, is proving to be hugely popular for consumers and businesses alike. EMarketer reported that in-store mobile payments saw year-over-year growth of 29%, with over half of smartphone users expected to use this method by 2025.

The clear appeal of mobile wallets is their flexibility: not only can consumers access the saved data for any mobile purchases, but they can also activate the mobile wallet for in-person payments without the need to get out a physical card. This is useful both for security purposes and convenience purposes — if a consumer forgets her wallet, she can still make payments with no issue. What’s more, all mobile wallet applications are free and readily downloaded on any smartphone.

The Shift to Contactless

Just as mobile wallets have made it possible to pay in person yet from a distance, contactless technology has made the same thing a reality for credit cards. Designed to be used by physically sliding through or inserting into a terminal, credit cards that have been upgraded with contactless technology unlock a whole new use case. This has been a game-changer in light of pandemic-induced hygiene concerns.

Contactless cards have an edge against mobile wallets as they are a familiar payment method for most people. They don’t require a behavior shift or a specific download; many banks have reissued all their cards with contactless technology, while others are happy to reissue without a fee to anyone who requests it. This means that contactless payments are accessible to all generations and demographics and even intuitive to any credit card user.

What the two technologies have in common is their ability to make payments quickly and securely, from a distance. A contactless card utilizes NFC technology to let the terminal scan its information with a simple tap or wave. Time is saved by eliminating the need to input a PIN, yet security is maintained throughout the transaction. This also means that drive-through or curbside pick-ups can be streamlined, both of which have grown more popular during the pandemic.

Looking Ahead

Consumers have embraced smartphones at scale and their use for mobile payments is no different. Combining convenience with security, mobile payments offer an upgrade to traditional systems with minimal or no downsides. Both consumers and companies alike have recognized that purchasing in a contactless environment can only make the customer journey smoother and more enjoyable. While the future may not fully be known, we can be confident that it involves mobile payments in a myriad of formats.

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