Mobile wallet technologies are in their infancy, but they are undoubtedly the future of point of sale transactions. Just as consumers have moved on from cassette tapes and compact disks to digital recordings and streaming, they will likely someday soon make the switch from traditional credit and debit cards to the digital versions stored on mobile devices or in the cloud.
A great example of the growing popularity of mobile wallets comes from India, where the number of transactions performed via a mobile device has more than doubled in just one year. According to the Economic Times, Indian consumers completed 53 million transactions with mobile wallets in August 2015 up from just 20 million in August 2014.
According to Forbes, payments from mobile sources like mobile wallets now comprise almost 30 percent of transactions around the world and though much of that growth comes from stores located outside of the United States. Forbes reported the technology is coming to the U.S. and more American consumers are adopting mobile purchasing power. With mobile wallet technology growing in popularity, here are a few things retailers need to know about what it is and how it works:
What are they?
Mobile Payments Today said there are currently three different types of mobile wallets in the U.S. Banks and credit card companies are developing their own technologies for their cardholders to use in retail outlets. Retailers with in-store private cards like Macy's or GAP may design mobile apps that feature the capability. Of course, titans like Apple, Samsung and Google all already have proprietary mobile wallet apps as well.
How do they work?
In order to use most mobile wallets today, a consumer must own a smartphone that is equipped with near field communications, Forbes said. Using that technology, consumers can simply select the card they wish to use on their smartphone, then hold the phone near a point of sale system that accepts mobile wallets and the transaction will be complete. Currently in the United States, all new-generation smartphones have NFC capability, though a Gallup Poll from July 2015 said only 13 percent of American consumers had a mobile wallet app on their phone.
Who can use them?
Though growth in mobile wallets is more accepted outside the United States, a growing group of American consumers is adopting the technology. According to a Pew Research study, 64 percent of American adults own a smartphone, and the majority of those who do have higher education and income levels than those who do not.
The Federal Reserve reported, the share of smartphone users who have reported making a mobile payment is increasing, with 28 percent of users reporting making mobile payments. This represents a growth of 4 percent over the previous year. The most common type of payments are linked to bills but 39 percent of payments made on mobile devices were point of sale transactions using mobile wallet technology.
People who reported not using their phones for mobile payments said that concerns over security were the main reason they shied away. That number may decrease as the ubiquity and security of mobile wallet technology increases over time.
Though relatively few people in the U.S. currently use mobile payment options, the use of the technology is slowly on the rise. As time passes, more users will likely adopt the systems and the sight of someone waving his smartphone at checkout will become more commonplace. The advent of US EMV support in the US will likely provide a push for mobile payments adoption. Retailers would be wise to get ahead of the curve and not be left behind by consumers who hbegin to expect this functionality.