The debate between mobile versus actual wallets is finally heating up. With the launch of several high profile smartphone providers’ mobile payments platforms, the proliferation of mobile payments apps from brick and mortar institutions and start-ups alike, combined with increased coverage in the press, it would appear that mobile is on the cusp of breaking into mainstream payments.
The mobile is the perfect channel to target consumers. Taking a step away from payments for a minute, mobile phones are becoming more and more essential in our daily lives. In a recent Reuters survey, two thirds of the people said they sleep with their mobile phones next to them and don’t turn them off as they want to feel connected. Such is the need, there has even been a word coined for it. In 2010, in a study carried out by the UK Post Office, the word nomophobia was born to describe the fear of being without a mobile device or beyond mobile contact. The study of over 2,000 people in the UK found that 58% of men and 47% of women suffer from the phobia – and that was 5 years ago. To take it a step further, a poll of 1,750 people carried out by Voucher Code Pro in 2013 found that 62% of women have interrupted intimacy with their partner to check their phone whilst 48% of men admitted to doing the same. Suffice to say people don’t have the same relationship with their wallet or ATM.
A survey of 200 consumers carried out by Compass Plus in Nottingham, UK found that when asked if they could leave their house with either their phone or their wallet, 111 people chose their mobile phone. As any one would expect, the survey also found discrepancies between age groups when answering this question. Mobile won over wallet for age groups under 30 at 68%, however for the over 30s wallet had the edge at 61%. Unsurprisingly, wallet became more popular the older the respondent; the votes coming in at 55% for 30-45 year olds, 60% for 46-59 year olds and 68% for ages 60 plus. Even the respondents from the most mobile reluctant age group showed a 32% preference towards their phone, which can only further demonstrate the lure of this device in modern society.
The attachment between individuals and their phone makes mobile ideal for payments. However, despite this relationship consumers still cling to cash. Research carried out by the Federal Reserve in the US found that contrary to belief, cash is not first choice for the majority of consumers, but it does play a significant role as a backup. The same study found that despite the hype around mobile payments, cheques are currently used 14 times more than mobile devices for payments. Whilst people have a unique relationship with their mobile phone, they also have an equally unique relationship with their money, and currently these are very much separate.
Consumers aren’t necessarily opposed to their mobile being a part of their financial lives, with only 12% of the 800 respondents from the 2014 survey carried out by Compass Plus saying they couldn’t see themselves ever using mobile payments - 38% of the 12% were over the age of 60. However, for the mobile to take the edge over the physical wallet, both opinion and habit has to change. The association between mobile and money is growing, albeit slower than anticipated and mobile remains on the fringe.
The future of the wallet is in limbo. However, whether or not the mobile will ever replace cards and cash isn’t even a question that we should consider asking at this stage of the adoption curve. Of the 350 billion global non-cash transactions in 2013, of which 18 billion (7%) were mobile, according to the RBS/Capgemini 2014 World Payments Report, only up 3.3% from 2012. Mobile payments are here, they are a worthy competitor in the payments space however consumers aren’t prepared to place all their eggs in this idiomatic wallet quite yet. To lose either your physical wallet or your phone would certainly ruin your day however the reasons behind losing your mobile are more in line with personal privacy than with personal finances. Your wallet is replaceable, cards can be cancelled and new loyalty cards and ID can be reissued. Mobile phones however, represent your first line of communication, diary, photo album, camera, personal messages, e-mail and even games, and in certain circumstances, are much more expensive to replace.
The mobile device has certainly become as important as the wallet, if not more so, but it is yet to threaten replacement. That is not to say that enhanced security and loyalty incentives won’t tip the balance in the future, but until the mobile can truly compete with cash and contactless for convenience in making low value transactions, and convince the average consumer of this fact, we will reside in a world with both.
By Bethan Cowper, Head of Marketing & PR at Compass Plus