"No wallet? No problem", CNN

The Future of Payments

Will Your Wallet and Credit Card Become Obsolete?

July 14, 2017, Bruno Jacobsen

Changing consumers’ mindset towards payment isn’t easy. Cash is still king in many countries, even with the advent of debit and credit cards. But now cash and card payments are facing a challenge from new foes - smartphones and social platforms. With over one-third of the world having access to smartphones, and their high penetration in developed countries, will we still need to carry our wallets around?

Companies like Google, with Google Wallet and Android Pay, and Apple, with Apple Pay, are pushing consumers to adopt what are known as mobile wallets. A person simply has to connect their debit or credit cards to these digital wallets and then they only need their phone to purchase products or services, online or offline.

There is still a lot of room to grow. The global mobile wallet market is posed to reach US$ 2.7 trillion by 2020, while some suggest the global mobile payment market can grow up to US$ 15 trillion by 2020. But in the US for example, only a bit over 10% have ever used their mobile phones to make any purchases . Some of the main issues revolve around security concerns on the users’ side, and the fact that many merchants do not offer NFC capabilities which are necessary for mobile wallets to be read.

But while mobile wallets have been at the centerstage of the conversation for a couple of years now, the most interesting challenge to a cash- and cards-based society may be coming from the Chinese company Tencent, owner of the famous chat app WeChat, which allows users to pay through their chat-based platform.

In 2012, WeChat users sent about $US 11.6 billion through the service. By 2016, this number had reached $US 1.6 trillion, making mobile payments accountable for 17% of all retail transactions in China.

With more and more companies joining WeChat, consumers can easily make purchases through their phone, whether they are buying products online or sitting down at a café. One of the main reasons for the growth of WeChat in the mobile payment industry is the willingness of merchants to join the platform. Instead of relying on websites, companies can use the chat platform to promote their inventory, show their menus, provide a range of services, chat with their customers through chatbots, and accept payments.

If companies like Facebook or Snapchat, who combined have billions of users and actively take steps to engage companies in the platforms, decide this is the future of payments, the world can be in for another revolution. Facebook’s Messenger already lets users send money to each other in the US, and Snapchat has introduced Snapcash with the same functionality.

What will this mean for the future of payments? It’s hard to tell. But we can be sure it will bring a lot of change, with digital payments growing at CAGR 33.4% annually, which makes it one of the future trends hard to ignore. If current adoption rates continue, paying through chats, social media platforms, or mobile wallets will likely become the norm.

For consumers, it would mean that they need to rely only on their phones to make purchases anywhere. If integrated with a platform like Facebook or WeChat, it could mean no more standing in line to make purchases or waiting for waiters to come over, and discounts and offers could be much more personalized. But of course, it is also likely to increase concerns over privacy and data usage.

For businesses, digital payments and social platforms around it will remove many barriers to purchasing and allow companies to gather more intelligent data from in-store purchases. It could also lift revenues for thousands of small businesses that have relied so far on cash and who lack proper POS systems, and improve customer service through shorter order and payment times.

But with a lot of growth to go, the real effects of a disruption in the payment industries are still unknown. All we know is that we're in for some interesting times.


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