It has long been clear that the future is cashless, but it is becoming increasingly apparent that the future is also cardless with more and more people choosing to pay by tapping their smartphone.
Card payments overtook cash in terms of sales volume for the first time in 2017, driven by the rapid take-up of contactless payments that are quicker and easier then cash.
Now, smartphone e-wallet payments are starting to catch up. So-called e-wallet payments may have only made up five per cent of transactions in 2017 according to statistics from Worldpay and Statista, but with ever more smartphones capable of mobile payments via Apple Pay, Google Pay, and Samsung Pay, that number is rising quickly. This growth is being driven by a combination of rapid improvements to smartphone technology, with NFC now a standard feature, and young people increasingly choosing to bank with digital banks like Monzo and Starling which are built around mobile payments rather than traditional high street banks that are being left behind. People aged 25-34 made up 35 per cent of all e-wallet users in 2017, while 35-44 made up a further 24.4 per cent.
The UK is also a leader when it comes to mobile payments, with the British public only behind China, India, and the United Arab Emirates (UAE) when it comes to e-wallet usage. The US and most other European countries lag behind with about 1-2 per cent of transactions made via mobile wallet. And for both China and India, their growth comes without the baggage of older financial systems, with mobile payments offering millions of people their first access to financial services. China’s growth has been spearheaded by tech giants like Alibaba and Tencent, whilst in India it is the Paytm system that is dominant, which lets people pay by QR code.
E-wallets and mobile payments have become popular because not only does it mean people can leave their wallets at home to pay for items in shops and travel on public transport, but also because they offer more security than basic contactless payments as they are generally authenticated by thumbprint. Contactless payments by card always sacrificed security for ease and simplicity, but with an app-based payment service you get both security and simplicity together.
They also combine online and offline purchases, so people can pay via Google Pay, Apple Pay, or PayPal with just few clicks at their favourite online shops as well as receive payments from family or friends. E-wallets have become particularly popular with gaming companies as they offer the most frictionless way for people to add money to their accounts to take advantage of a VIP and highroller bonus as well as withdraw the money they have won.
Analysts believe digital wallet transactions will account for around 28 per cent of all global transactions by 2022 with over 1.5bn users across the various platforms. By contrast, cash is expected to have fallen to just 17 per cent of transactions over the same period and card payments are also expected to decline.