Digital Wallets and More…
To finish off our Cashless Society series I want to look at the Fintech giants that are leading the digital money revolution. Whilst services like Apple Pay and Google Wallet have become more widely available, they haven’t quite taken off yet. They seem to be offering the transition to the digital economy that we are told is all but inevitable, but they haven’t managed to take off in the way that say, contactless cards have.
Jordan McKee, an analyst at 451 research commented that, “Mobile wallets haven't yet proven they are measurably better than incumbent payment mechanisms, which general work quite well”. Avivah Litan, an Analyst at Gartner, put the lack of uptake of digital wallets down to the ease of current systems,
“It's incredibly easy to swipe or dip a credit or debit card at a payment terminal and U.S. consumers are used to this mature payment application where they know they are well protected from financial loss…..It will take a lot of persuasion and financial incentives to get consumers to change their payment habits.”
Apple Pay is built around contactless payment technology. It pulls your credit cards, debit cards, and other sensitive-payment data from the Wallet app, enabling you to use an iPhone or Apple Watch like a contactless card at store checkouts.
Apple Pay is growing fast as well, with some experts commenting that it could well be Apple’s saviour. Users of Apple Pay completed more transactions in September 2016 than they did in the entire year of 2015. And on top of that transaction volume was up 500% in the fourth quarter, compared to the same quarter in 2015. Someone in Kensington, England, even used the service to pay for a 1964 Aston Martin DB5 worth over $1 million.
This growth can be partially attributed to the expansion in service from just the US and the UK, to now include Switzerland, Canada, Australia, China, France, Hong Kong, Singapore, Japan and Russia, with Spain soon to follow. Apple has also expanded the payment service to the web, to enable it to be used on mobile phones and desktop computers through Safari, and to be used in apps like Uber or Starbucks. According to CEO Tim Cook, hundreds of thousands of websites are now Apple Pay ready.
Google Wallet/Android Pay
Android Pay has been developed by Google to power NFC (Near Field Communication) payments with phones, tablets, and watches, as a rival to Apple Pay. At the minute, they are only in the US, UK, Singapore, Hong Kong and Australia – lagging behind Apple on the availability of the service – though they are rumoured to be starting up in Canada in the near future! They have also have benefitted from the expansion of MasterPass to cover Google Wallet transactions online, expanding their coverage and viability as an alternative to Apple Pay.
Android pay is available to use, in the countries it operates, nearly everywhere that Apple Pay is (though you might not see branding in quite the same way) and has a major bonus in that you can collect rewards for purchases, unlike Apple Pay.
These digital wallets operate under varied circumstances, but the premise and underlying goals remain similar. Yet, despite their adoption by major providers, there are still alternatives that are being implemented by retailers and businesses.
Aside from all the fanfare of mega-investments from Apple, Samsung and Google in NFC on smartphones, Starbucks, Dunkin' Donuts and Walmart Pay allow customers to pay using a QR code displayed on a smartphone, which is a much most cost effective alternative. Starbucks customers spent an estimated $3 billion using the Starbucks app, though the success of apps of this nature can be partially attributed to the customer loyalty that the apps build with vouchers and offers for users.
Nitesh Patel, an analyst at Strategy Analytics, suggested that this could be the main reason for their success over digital wallets, “so far, mobile wallets, particularly NFC, have yet to integrate payments with loyalty in a compelling way…. You need a single tap to redeem or accumulate points and coupons”. Ultimately, the frills of the service are what is going to sell it to the general public, and digital wallets just don’t have those frills yet (especially Apple Pay, though it makes up for it somewhat in its widespread adoption).
Ultimately, we are still very early on in the transition to a cashless society. The technology is all but there, but the infrastructure and cultural acceptance hasn’t quite got there. It isn’t clear quite yet as to whether the digital wallet market will remain as open or competitive, or whether it will become an Android vs Apple battle. We shall simply have to wait and see who establishes themselves as the frontrunner.
By Josh Hamilton