Smartphone Swiping In The Mobile Age
Drawing on recent Pew Internet surveys and others, Aaron Smith, Janna Anderson and Lee Rainie have developed a comprehensive report released by the Pew Research Center’s Internet & American Life Project on the The Future of Money in a Mobile Age.
Recent Pew Internet surveys find that one in ten Americans have used their cell phone to make a charitable contribution by text message, that more than one-third of smartphone owners have used their phones to do online banking services like paying bills or checking a balance, and that 46% of apps users have purchased an app using a mobile device.
Research from comScore has found that 38% of smartphone owners have used their cell phone to make a purchase of some kind, with digital goods (music, e-books, movies), clothing and accessories, tickets and daily deals leading the way as the most popular mobile retail categories.
A March 2012 Federal Reserve report, notes the report, found that 21% of mobile phone owners had used mobile banking services in the past year and that:
- 90% of mobile banking users use their cell phone to check account balances and recent transactions
- 11% of mobile owners plan to use such services in the next 12 months
- 42% of mobile banking users transfer funds between accounts
- 12% of mobile phone owners have made payments, such as paying bills online or transferring money directly to another person’s account, via their phones
A number of financial services and technology firms have set their sights on integrating mobile devices into the broader, multi-trillion-dollar retail economy, says the report.
These mobile payment and transaction solutions currently take a number of forms. Some allow merchants and businesses to accept “on the go” credit card payments from customers using a special card reader that plugs into a smartphone or tablet computer. Others facilitate direct person-to-person financial transfers using mobile devices, either by physically touching phones or exchanging electronic credentials such as a phone number or email address.
- In late 2011, Google launched Google Wallet in partnership with Citibank and MasterCard. Based on a technology known as near-field communication (NFC), Google Wallet allows users to store payment information in the cloud and pay for goods at participating retailers by tapping their phone at the point of purchase
- Another consortium will be piloting a similar NFC-based mobile payment system known as ISIS starting in select cities in mid-2012
- PayPal and Visa have also announced plans for mobile wallet systems, and many analysts predict that Apple will announce its own virtual wallet service in the near future
Proponents argue that these “mobile wallet” systems hold a number of advantages over the use of cash and credit cards for payment. They argue that:
- Systems are simpler and more convenient for consumers, since users need only carry a single all-purpose device rather than multiple forms of paper and plastic
- Because users’ shopping and purchasing behavior in real time can be tracked, mobile wallet systems can offer advanced “personal shopper” services, as well as improved loyalty programs and more targeted promotions from vendors
At the same time, critics have pointed towards a number of factors that might limit the widespread adoption of mobile payments:
- Not everyone will use a smartphone
- Questions about whether credit card companies will move away from the current profitable system in the developed world
- The potential susceptibility of NFC to hackers, market fragmentation
- Lack of interoperability of mobile finance systems due to the many different platforms being developed and implemented
- Whether consumers will feel comfortable storing the intimate details of their financial lives in the cloud
In light of this ongoing debate, the study invited experts and other Internet stakeholders to offer their predictions on the future of mobile payments, and what people’s “wallets” might look like in 2020.
65% agreed with the statement:
- By 2020, most people will have embraced and fully adopted the use of smart-device swiping for purchases they make, nearly eliminating the need for cash or credit cards. People will come to trust and rely on personal hardware and software for handling monetary transactions over the Internet and in stores. Cash and credit cards will have mostly disappeared from many of the transactions that occur in advanced countries.
33% agreed with the opposite statement, which posited:
- People will not trust the use of near-field communications devices and there will not be major conversion of money to an all-digital-all-the-time format. By 2020, payments through the use of mobile devices will not have gained a lot of traction as a method for transactions. The security implications raise too many concerns among consumers about the safety of their money. And people are resistant to letting technology companies learn even more about their personal purchasing habits. Cash and credit cards will still be the dominant method of carrying out transactions in advanced countries.
Overall, a majority of these respondents supported the scenario that by 2020 most people will have embraced and fully adopted the use of smart-device swiping for purchases they make, nearly eliminating the need for cash or credit cards. These experts feel that the explosive growth in the use of smartphones and other mobile devices, combined with the convenience, security, and other affordances of mobile payments systems, makes these systems an obvious choice to replace established modes of payment in day-to-day commerce.
At the same time, the expert respondents are divided on how quickly this technology will displace established transaction methods. In elaborating on their predictions, a number of respondents indicated that they expect this process to develop generationally, with younger users jumping to abandon cash and credit cards while their parents and grandparents make the move to mobile payments slowly, if at all.
A sampling of predictions and arguments from a variety or qualified respondents follows in the report, which may be accessed here in PDF format for your continued interest.