Mobile payments: A tipping point in the UK
A new analysis from Worldpay confirms that mobile payments are fast approaching a “tipping point” in the UK. Indeed, in-store mobile payments topped £975 million in 2017, while the total number of contactless transactions (made with a mobile device) totaled 126 million.
“[These statistics] mark a 328% year-on-year rise in in-store mobile spending,” Worldpay stated in a recent press release. “With almost a third of consumers now taking advantage of their phone’s payment capabilities, these numbers are set for exponential growth over the next 12 months.”
According to Worldpay, the supermarket sector has been a significant driver in the adoption of digital wallets such as Apple Pay, Google Pay and Samsung Pay, with pubs, bars and restaurants comprising a further 12.5% of the total spend. However, consumers have begun purchasing higher value items with their smartphones – with a salient increase observed after retailers began accepting ‘limitless’ Apple Pay transactions in May.
As such, luxury department stores and high-end boutiques are now one of the fastest growing sectors for mobile payments. While the volume of mobile transactions in this category remains a small part of the total (2.9%), its share of the market has more than doubled since last year.
Last, but certainly not least, the Worldpay analysis also found that more than half of (surveyed) UK consumers see a future – within the next five years – where mobile replaces plastic. Perhaps not surprisingly, this number jumps to 65% for Gen Z (the 16-20-year-old demographic).
Mobile: Fundamentally redefining the retail industry
In related news, PayPal CEO Dan Schulman says mobile will “fundamentally redefine” the retail industry.
“Already, it’s starting to do that. It is blurring the distinction between online and offline,” he elaborated in a statement cited by Yahoo Finance. “People used to think about e-commerce and in-store. Mobile erases those boundaries.”
As an example, Schulman highlighted the example of a customer using a mobile phone to place a food order.
“If you order a Subway sandwich on your mobile phone, customize it, you pay for it there,” he stated. “Then you go into the store, skip the line, pick it up, maybe tap your phone to pick up the rewards points or whatever it might be, was that an online transaction or an offline transaction? It was both.”
According to Schulman, checkout is like a “vestigial organ” of yesterday, which will inevitably disappear.
“[Look at] those retail stores in China now. It’s almost like a Hollywood set. There’s what’s there and behind it is the warehousing,” he stated. “It’s like bags moving around. You order it and it’s shipped to your house within 30 minutes.”
Ultimately, says Schulman, mobile will alter everyday consumer behavior.
“I think the best payment apps will transcend just payment itself. It will tie into all of your other activities,” he added.
Redefining the traditional retail experience
As we’ve previously discussed on Rambus Press, expanding mobile commerce channels and emerging technology are altering expectations of the in-store experience, prompting brick-and-mortar shops to reassess the traditional retail experience. More specifically, retailers must now find new and powerful ways to engage with consumers. Within this context, mobile payments are increasingly being identified not just as a necessary process to be managed, but as a lucrative opportunity. As retailers and merchants expand their payments activity and investment, deploying a branded digital wallet will be a key consideration for many.
More specifically, a well-executed digital retail wallet deployment can deliver improved payment security, reduced operational costs and increased revenues. The challenge for retailers will be to accelerate time to market and provide a seamless and enhanced experience from the outset. As market demand and consumer expectations evolve, functionality can subsequently be upgraded to meet emerging requirements.