Cash is no longer king. Consumers used physical currency in just over one quarter (26%) of transactions in 2018, according to research by the Federal Reserve. That’s down four points from the year before.
Debit and credit cards are now the most popular choice for consumers, but even these trusted payment methods are under threat. Electronic and mobile payment solutions are proliferating. Not content with the outsized role that smartphones play in our lives, big tech brands are now trying to replace your wallet, too.
Are mobile payment apps the future of online and in-store payments, or are they a bubble waiting to burst?
What Are the Leading Mobile Payment Providers?
Before we assess the popularity of mobile payment solutions as a whole, let’s look at three of the major players.
Apple Pay is Apple’s mobile wallet that comes pre-installed on iPhones. Users store credit and debit cards in the wallet and use it to make contactless purchases in person.
Apple Pay has a number of advantages over competitors, writes Quartz’s John Detrixhe. Firstly, it comes pre-installed on iPhones, so consumers already have exposure to it. Further, Apple controls the device’s NFC technology used for contactless payments. This means it’s the only mobile wallet available on the iPhone that can be used for contactless payments.
It’s also incredibly easy to use Apple Pay online, assuming the website supports it. All the user has to do is click on the Apple Pay icon and use their iPhone, watch or iPad to authenticate the purchase with their fingerprint, explains CardFellow Founder Ben Dwyer.
It’s not that easy for merchants, however. Apple Pay can be complicated for users to integrate into their checkout process, writes eCommerce strategist Linda Bustos, Founder of the eCommerce advisory firm Edgacent. Brands are responsible for validating data, which will often require changing the way your checkout takes customer information. “For many merchants, changing business logic to serve a relatively small number of Apple Pay users is more hassle than it’s worth,” she notes.
Venmo and Paypal
Venmo is a mobile payment app from PayPal that lets you make purchases in-store and online, and share payments with friends. You can link your bank accounts, debit cards or credit cards to the app and use any of them to fund purchases or money transfers.
Venmo is “the default way millions of Americans settle a check,” writes Louise Matsakis at Wired, but that doesn’t mean the app is perfect. She says the social element of the app — all peer-to-peer transactions are automatically public — is questionable in a world where we are increasingly concerned about data privacy.
Still, because the app is widely used by Americans, it makes sense for many retailers to accept Venmo both online and in-store. This was the case for Rekha Panda of Raeka Beauty who was told by clients that they preferred using Venmo to cards. “Venmo is easy, fun and safe. Clients feel protected and comfortable not having to share their credit card [or] debit card data with online stores,” she said.
The good news for online retailers is that if you already have Paypal as a payment method, you don’t need to do anything to accept Venmo. The two services were integrated in 2017 so that Venmo users can make payments on their phone in any store that has a PayPal checkout.
Google Pay is Google’s Mobile Wallet and an Android alternative to Apple Pay. While it doesn’t come pre-installed on all Android devices, users will create an account when they use the Google Play Store.
Like other mobile payment apps, Google Pay lets you make payments via your phone, send money to friends and make transfers with Gmail. If you have a Chase debit card, you can even use Google Pay to make ATM withdrawals, writes CNET’s Patrick Holland.
Google Pay doesn’t have the features to rival Apple’s version according to Joe Maring at Android Central, but it does make paying for things very easy. “Adding cards to Google Pay is a breeze, just about every major financial institution is supported with new ones being added all the time, and using it at supported stores works without a hitch,” he explains.
Google Pay also integrates with Paypal. This allows merchants who have already integrated Google Pay into their checkout to easily add PayPal as a method of payment as well, writes Sarah Perez at TechCrunch. A tiny code change is all that’s needed.
Other mobile payment providers
While these three are the dominant apps, they are far from the only ones available to consumers. Others include:
- Square’s Cash App.
- Samsung Pay.
Who Uses Mobile Payments, What Apps Do They Use and What Do They Use Them For?
Apple Pay is the leading mobile payment method in the U.S. according to research by eMarketer. It even beat the Starbucks app for top spot in the research firm’s 2019 mobile payments forecast — the first time a non-store brand app has won. Apple Pay boasted more than 30 million U.S. users in 2019, being over 47% of the market. In comparison, Google Pay captured just 12.1%.
Stores are quickly updating to this trend. Digital Trends’ Christian de Looper predicted 70% of retail locations in the U.S. would adopt Apple Pay by the end of 2019.
eCommerce brands should follow suit. NerdWallet has found online transactions are a big deal when it comes to mobile payment apps. The majority (53%) of app users have used them to pay for online transactions, writes Nerd Wallet’s Erin El Issa. Just under half (43%) have used them to pay a friend or family member. What’s more, most use the payment apps at least once a week.
That said, mobile payments make up a very small piece of the brick and mortar pie. According to research by 451 Research, mobile payments account for only 1.6% (equivalent to $78.6bn) of total in-store transactions in 2019, writes Sarah Clark at NFCW.
Experts Are Bullish on Mobile Payments
Despite accounting for a tiny percentage of in-store payments, many experts are confident the best of mobile payments is yet to come.
For instance, Jordan McKee, Researcher Director at 451 Research, says the future of mobile payments looks bright. For one, more people have iPhones capable of contactless payment transactions than ever before. Secondly, and perhaps more importantly, he points out that the number of use cases for this technology is growing. New York’s transit system will soon accept contactless payments, for example, and Apple is already partnering with companies like Ticketmaster and PayByPhone to integrate third-party services within the app.
Auka CEO and Founder Daniel Döderlein writes that mobile payments are likely to become the leading payment method in the future. They aren’t just convenient for customers, they’re convenient for businesses, too.
Security is another reason eCommerce brands should consider offering mobile payment options. One of the main reasons people abandon carts is concern about credit card security, writes Growcode’s Pawel Ogonowski. Providing a way to make a purchase without handing over card details immediately alleviates this issue.
The novel coronavirus is also affecting the rise of mobile payments. For example, restaurants turning to mobile payments and other cashless transactions in a bid to stop the virus spreading, writes Jaya Saxena at Eater. Many are going as far as to refuse cash payments entirely.
What About Global Mobile Payment Trends
Apple Pay is the frontrunner in the U.S. but the global picture is much murkier.
According to Merchant Savvy, China is the world leader in mobile payment adoption at 81.1%. Adoption in much of Europe is significantly lower than the U.S adoption rate of 29%. Italy is at 21.1%, the Netherlands at 19.7%, the UK at 19.1% and Germany at 12.5%.
While adoption is high In China, the market is dominated by WeChat, writes TechHQ’s Jia Jen Low. The app can be used to pay for pretty much everything, including in stores, vending machines and public transport.
In the UK, the major reason overall adoption remains comparatively low is because of the preference for contactless card payments, says Christopher Bendtsen, a Principal in Research for Financial Services at Gartner. “Consumers feel the trust and ease of contactless cards are all they need, and they just aren’t convinced that mobile payments would give them any added benefit.”
Mobile-focused challenger banks are also much more prominent in Europe, writes TechCrunch’s Romain Dillet. EU regulations make it much easier for banks to get started and to grow.
These challenger banks put mobile at the heart of their product. Most are accessed via smartphone, have contactless debit cards and provide peer-to-peer transfer functionality. Plus they have all of the consumer protection that traditional banks offer.
In short, there really isn’t one global leader when it comes to mobile payment apps. U.S. retailers should focus on Apple Pay, but payment localization must be incorporated whenever a brand sells abroad.