The Digital Executive: Mobile payment

Monday, July 22, 2013

Mobile (Digital) Wallets are gaining traction

A digital wallet refers to an electronic device that allows an individual to make electronic commerce transactions. This can include purchasing items on-line with a computer or using a smartphone to purchase something at a store. Increasingly, digital wallets are being made not just for basic financial transactions but to also authenticate the holder's credentials. For example, a digital-wallet could potentially verify the age of the buyer to the store while purchasing alcohol. It is useful to approach the term "digital wallet" not as a singular technology but as three major parts: the system (the electronic infrastructure) and the application (the software that operates on top) and the device (the individual portion).

An individual’s bank account can also be linked to the digital wallet. They might also have their driver’s license, health card, loyalty card(s) and other ID documents stored on the phone. The credentials can be passed to a merchant’s terminal wirelessly via near field communication (NFC). Certain sources are speculating that these smartphone “digital wallets” will eventually replace physical wallets. The system has already gained popularity in Japan, where digital wallets are known as Osaifu-Keitai or “wallet mobiles”

The potential of mobile payments is enormous: there are 1.3 billion active credit and debit accounts in the world, but more than 5 billion active mobile phone accounts. In Africa and Asia, financial transactions via mobile phone are a widespread way to overcome deficits in banking infrastructure.

In the western world, the growing adoption of smartphones and the technological progress have given rise to the idea of mobile wallets.

This chart shows key facts about mobile wallets: adoption, benefits and opportunities.

Friday, October 19, 2012

Are Smartphones the new wallets?

eMarketer expects the transaction volume of mobile payments in the United States to reach $640 million this year and predicts a 100-fold increase until 2016. But are we really ready to ditch our wallets in favor of our smartphones?

When Apple released the iPhone 5 last month, some people were disappointed that Apple chose not to include a Near Field Communication chip for mobile payments. Others interpreted Apple’s omission of an NFC chip as proof that the time has yet to come for the technology to become relevant to the mass market. After all, Apple has a history of dismissing technologies until they have proven their viability. eMarketer expects 8 million Americans to make a point-of-sale purchase with their smartphone this year. That’s roughly seven percent of U.S. smartphone users and clearly shows that mobile payments are still in the early stages of adoption. If eMarketer is right, almost 50 million Americans will be using their phones to make in-store purchases by 2016. So the iPhone 7 will probably have NFC.