As Apple Pay launches in the UK, it’s a good time to step back and ask: when are we getting a truly global mobile wallet? That is, a wallet that can be used in any country, anywhere in the world – both in-stores and online. Recent Adyen data shows that we’re adopting mobile payments – in fact, mobile now accounts for 29% of all online transactions globally. And by 2020, 80 percent of the world’s adult population is projected to have smartphones, so a global wallet is a fair expectation.
After all, centuries ago, there was a global currency – one that permeated the Roman Empire, Persian Empire, Silk Road and the spice route to India – gold coins. Yet, millennia later, after all the technological advances we’ve made, we’re left with a world that uses more than 180 currencies, a myriad of payment options in stores and hundreds of online payment methods. What will it take to get to the promised land?
First, a bit of recent history. In 2011, I led the marketing launch for Google Wallet, which launched with fanfare in front of a receptive press audience in New York City. With the Wallet, we showcased how a shopper could pay in stores, redeem coupons and earn loyalty points, all with a tap of the phone, using a technology called ‘near field communications,’ or NFC. Granted, Google Wallet had its limitations. It was only available on one phone model, with an exclusive carrier and issuing bank, and was accepted at limited merchants. Regardless, it was revolutionary, and it seemed it was only a matter of time before it would become the ubiquitous payment technology.
Fast forward to 2015, and things have changed. For instance, NFC is now available on nearly all high-end smartphones. Android has supported the technology for years, and Apple recently got in the game with the iPhone 6. Apple and Google agreeing on a standard? Miracles really do happen. Yet, there are still many issues prohibiting mass adoption of digital wallets in the U.S., as highlighted in a recent Gallup study. The study found only 13 percent of U.S. adults have a digital wallet app on their smartphone, with 76 percent of them hardly using it in the last 30 days. When asked what the primary barriers to adoption were, 55 percent cited security concerns, 21 percent mentioned that they just didn’t know enough about it and 14 percent didn’t see any benefit.
To help address these challenges, we can look eastward for answers. Some of the most interesting developments have come from emerging markets in Asia and BRIC countries. As e-commerce continues its rapid growth in the region, mobile wallets have become one of the most trusted and preferred ways to pay online. Most of these wallets incorporate multiple payment methods, from bank transfers to credit cards, debit cards, gift cards and more. That way, both consumers with credit cards and those without can use mobile wallets. Some of the most popular mobile wallets include:
- Alipay – Alipay accounts for nearly 50 percent of transactions in the world’s largest e-commerce market, China. With over 650 million Internet users in China, and 80 percent accessing the Internet through their mobile phones, Alipay could very well be the most widely used mobile wallet in the world. Last year, Alipay announced its mobile payment volume was greater than PayPal and Square, combined.
- Paytm – Paytm is a budding e-wallet in another Asian giant, India. Although much smaller than Alipay, 80 percent of Paytm’s new users are on mobile. Plus, its exclusive tie with Uber has been rapidly driving growth.
- Yandex - The Russian search giant also powers a popular e-wallet, with 22 percent of Russians using it regularly to pay online.
What’s interesting is that in the past few months, many of these cloud mobile wallets are powering in-store transactions as well. For instance, Wal-Mart recently announced that shoppers can pay with the Alipay mobile app across 25 of its stores in China. At checkout, the customer flashes a barcode in the Alipay mobile app, and the cashier scans the code to verify the payment. Wal-Mart is not alone; over 40,000 supermarkets and convenience stores, operated by 70 retail chains, now accept Alipay, including Carrefour, 7-Eleven and Auchan. Similarly, Yandex recently announced that Ukrainian drivers can now pay for fuel at more than 1,300 outlets across the country with its mobile wallet.
To use the service, the driver links a payment card from any registered bank in the country to the Yandex refueling app. On arrival, he/she selects the fuel station from a list of available locations in the app, enters the pump number and the type of fuel he/she requires. Both of these examples demonstrate that in non-credit card-centric markets like China and Russia, NFC is not the answer. Rather, cloud-based mobile transactions via barcode or app might be the way of the future. Consumers in these markets already trust their mobile wallets, and are ready to use their phones to pay, today.
In-store payments are the key to mass adoption for mobile wallets, seeing as more than 90 percent of transactions occur in stores. In the coming years, it will be interesting to see which standard wins out for in-store purchases: NFC or barcode/app-based payments. As it stands, in the U.S., Starbucks garners the most mobile payments by far, deploying a simple closed-loop barcode scanning solution. The question is, as Apple Pay and Google Wallet truly globalize, will they rely solely on NFC, or also support barcode scanning and in-app payment in stores? Or, with Alipay, Paytm, Yandex and others amassing an impressive user base, will they become the default and gain popularity in the West as well?
The Apple Pay UK launch is just the beginning.
Adyen is a global payment platform that works in 200+ countries and territories with over 250 payment methods and 187 transaction currencies. Review its latest Mobile Payments Index report here.
