In 2013, BBC News published an online article asking whether smartphones can become smart wallets. The site pondered whether an old technology like Near Field Communication could be used to send payment details between mobile devices and checkout.
We know the answer a decade later, but how close are we to a society that is run entirely on mobile payments?
Global Saturation
The smartphone payments market has been slow to grow, especially considering there are slightly more mobile phones than people on earth, estimated at 8.58bn devices.
While a decade isn’t a long time for something to gain a global footing (it took the Internet seven years to reach 100 million users), it’s easy to see how fears about security and privacy might hamstring finance products. So, let’s say that global saturation was unlikely by now.
We aren’t even close. FinTech company Boku estimates that 50% of the world will embrace mobile payments by 2025. Again, this figure might seem unimpressive, but it’s higher than credit card usage – and it has been since 2019.
Mobile wallets are a convenience rather than an essential app (users pay through their existing bank account even when using Apple Pay, for instance), explaining the slow uptake. Yet, there are some advantages to going without plastic.
Tokenization
Similar to cryptocurrency, mobile payments use tokenization to shield personal details from exposure. Apple Pay does not send bank details when payments are made. Customers in some industries prefer this over others. For example, the casino industry champions the privacy of its players.
In its article about the top rated online casinos in Canada, the CASINOenquirer website notes that Interac is the most popular payment processor in the local sector. Still, the anonymity offered by crypto is appealing to “tech-savvy” gamblers.
Google Pay and Apple Pay are noted for their simplicity. Since the use of smartphones is widespread, they’re always on hand.
Having niche appeal is vital for growth, but inevitably, mainstream adoption is prized. The use of mobile wallets is projected to grow at a CAGR of 27.4% between 2022 and 2030 – where it’s still possible. Strangely, smartphone wallets are much more prevalent in some places than others.
“Super App”
The NimbleAppGenie website points out that 900 million people in China use Alipay for shopping, making the country’s total adoption rate reach 87.3%. Since 2019, this number has increased by 6.2%. In addition, Paytm in India is also very popular.
These numbers are indeed impressive, but they have a potential limitation. As a “super application,” Alipay covers almost every aspect of life, including transportation tickets, car rental, insurance, identity authentication, food shopping, etc., which makes it almost indispensable in China.
Given this, it is questionable whether Western countries such as the United States and European countries can achieve such a high level of acceptance. After all, the payment habits and market environment in Western society are very different from those in China.
However, the popularity of mobile wallets will not diminish as a result. The only possible obstacle to its growth is the market fragmentation issue that has already affected payment processors. The number of potential users is limited, after all.
In addition, users in Western countries are more inclined to choose special-purpose applications than integrated solutions like Alipay.
Due to cultural, regulatory, and technological differences, payment applications in the Western market are more competitive, and users may be more willing to use different applications to meet different needs, rather than relying on a single “super application”.
Therefore, although the usage rate of mobile wallets will continue to rise, in the Western market, achieving the same level of penetration as in China may still require overcoming many obstacles.
Meanwhile, concerns about privacy and data security are also important factors. Western users are usually more sensitive to how their data is used and stored, which may affect their acceptance of super applications.
In addition, government regulatory policies and the degree of market openness will also affect the expansion and popularization of payment applications.
Therefore, although the usage rate of mobile payment applications is continuously increasing globally, the market characteristics and user preferences of each region will determine its development path and speed.
