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Though they may be hesitant to admit it, the COVID-19 pandemic has been quite good for some industries. As you can imagine, firms that provide products and services for the newly expanded work-from-home (WFH) crowd, as well as home learning have seen their profits spike now that remote working is the new normal.
There are less obvious winners from the pandemic, too. An example is companies that provide mobile wallets. More precisely, companies that already had in place an effective method of taking these payments. In other words, mobile payments are becoming more common and now represent the "new normal" as much as working from home does.
As a result, retailers should take a serious look at the advantages mobile payments offer, and the challenges that will need to be overcome in order to achieve them.
There are two clear reasons why mobile wallet payments have spiked in the last few months. One is simply that paying with a phone is safer than paying with cash when it comes to protecting yourself and others from COVID-19 transmission. The other is that alongside the rise in remote working and remote learning has come an increase in online shopping, where mobile wallets have been a popular, if still underused, way to pay. This is not surprising. What do you do when you're stuck at home and bored? Order stuff online.
Data indicates that the move to mobile wallets has been indeed dramatic. An analysis released by Appriss Retail, a division of Appriss, "The Rise in Contactless Payments During COVID-19," documents changes in payment tenders related to COVID-19. The pandemic has significantly increased the adoption trajectory for mobile wallets such as Apple Pay, Google Pay, Samsung Pay, PayPal's Venmo and more, leading to payment volume increases in all sectors.
Consumer-level data suggests a similar shift. In April, 50% of all consumers made at least four contactless payments, and during the same month 57% of shoppers said they would be comfortable using mobile wallets while continuing to make contactless payments after the coronavirus pandemic. And in the last two months, 30% of consumers have made mobile wallet transactions for the first time. Therefore, though it's taken a while and required a bit of a push from a global pandemic, statistics indicate that consumers may finally be ready to adopt mobile wallets.
Mobile wallet challenges
Despite the advantages of mobile wallets, especially during these strange times, they also present a number of challenges for retailers and consumers alike.
Data suggests that by far the biggest issue when it comes to consumer adoption of mobile wallets is that of trust. Customers worry that using their phone to pay for purchases is inherently less secure than using cash or a credit card. In some ways, they are correct: Research indicates that mobile wallets are a major target for hackers, and that they can be easier to breach than "traditional" banking solutions.
In order to overcome this issue, mobile wallet developers will need to recognize that these issues have been faced and overcome before by the "traditional" banking and payment businesses they now compete with. It took customers a few years to acclimate to the multifactor authentication process, but now using it to secure access to banking apps is second nature. Much of the work that needs to be done in relation to mobile wallets is of the same type, namely building familiarity and trust with customers.
If this trust issue can be overcome, though, mobile wallets offer formidable advantages for firms willing to embrace the idea. In order to understand the promise of the new technology, it's worth pointing out that mobile wallets are not, despite first appearances, a financial technology. Instead, they will have their biggest impact on the field of customer experience (CX).
This is what the stats indicate, at least. Recent research has shown that 67% of adult smartphone users wanted a mobile loyalty card, while 77% of respondents were interested in having expired coupons automatically updated to new offers on their phone. In other words, it's not just a new way to pay that consumers want. It's a desire for more convenience.
Mobile wallets provide this in a number of ways. The most obvious example that we've seen recently has been the kind of contactless payments that people are more willing to make during the pandemic. Earlier this year, 72% of consumers were already using mobile devices while shopping in brick-and-mortar stores, representing a 54% jump from 2019.
However, the concept of mobile wallets also contains a potentially revolutionary shift for retailers: a move to true, omni-channel shopping. Three of the largest tech companies in the world -- Google, Apple and Samsung -- have been the primary drivers of the adoption of mobile wallets, and it's not hard to see why. The eventual goal of these initiatives, as Google has hinted at, is to integrate them into our digital lives to the degree that customers can search Google for a product, and pay for it with one click.
The goal is to make shopping more seamless than ever before but will also have positive consequences for retailers. A study by the University of Illinois from 2019 found that, on average, after adopting mobile wallets, average consumer order sizes increased by 2.4% and transaction frequency jumped by more than 23%.
If these numbers bear out, it will deliver a noticeable impact.
The future of mobile wallets
Look at mobile wallets in context -- not just in relation to the pandemic, but also given the increasing use of AI in the payments industry -- and it's not hard to see that there is a revolution coming. The spike in mobile wallet usage in the past few months, in other words, is unlikely to be temporary. Rather, it represents another side of the new normal. One that retailers, consumers and payment processors alike are going to have to get used to. Realizing these opportunities will require building trust with customers -- not always an easy feat, but once it is accomplished, look out.
About the author
Brian Skewes is a technologist into deconstruction. Over two decades of self-employment, he has accumulated a wealth of inadvertent real-world lessons related to building, running and preserving a small company.