London, 4 June 2015: Smart devices on track to replace cash and cards as UK mobile payments projected to hit over £1.2bn a week by 2020. So says Jeremy Nicholds, Executive Director for Mobile, Visa Europe.
Visa’s latest predictions
Despite many false dawns, UK mobile payments is predicted to grow three-fold over the next five years as savvy shoppers embrace new options and spend more on mobile, with one in four consumers estimated to spend more than £50 a week on mobile by 2020.
British consumers driving the change
Nicholds believes the UK is moving towards a “cash-last” society as one in four Brits expect to use their mobile phone to make payments on a daily basis by 2020, growing from the one in twelve who do so already today. According to new research from Visa Europe, consumer adoption of mobile payments will grow faster than ever in the next five years, with six in ten Britons (60%) expected to use their mobile devices for payments at least once a week by 2020.
The UK mobile payments boom will probably see an upsurge in the weekly value spent using mobile devices, with the market growing to an estimated £1.2bn per week* by 2020. The tech-enabled shopper expects to spend £27 on mobile each week by 2020, up from the £17 they spend today. In fact, nearly 24% respondents think they could spend more than £50 a week using a mobile device by 2020, an estimate sure to raise eyebrows in the payments industry.
While apps and music are still the items are the most popular mobile purchase today, Visa has observed a growing number of consumers already buying higher value items, with electronics (23%) and clothes (22%) among their top-five most purchased m-commerce items.
The expected British embrace of digital payments is a sign of shoppers’ becoming less nervous with mobile payments as the option becomes more widely available, easier to use and better understood. With the increasing publicity around m-commerce options, digital wallets and contactless payments, 43% of shoppers say they may be interested in using a mobile wallet service and nearly half (47%) are interested in using their smartphone to make low-value contactless payments in a shop.
Nicholds added, “While we’re excited to see consumers saying they expect to triple their weekly spend using mobile payments over the next five years, we at Visa think those numbers could be rather conservative and that the actual adoption rate will be much higher. This is particularly true when you look at the growth in contactless usage, which saw European usage grow by 2x and spend grow by 3x over the last 12 months.
Contactless and online commerce enhancements have been key in paving the way for the next generation of mobile payment technology. The environmental conditions are already in place to meet the demands and expectations for digital payments. It’s no longer a question of ‘if’ consumers will embrace this new way to pay – it’s when – and for us the next 12 months are when mobile payments become mainstream.”
People who’re already using mobile devices to make transactions are also open to other mobile money services. The research highlights that these ‘mobile money’ users are five times more likely to be interested in paying friends through a smartphone app compared to non-users (48% vs. 9%). One in five would be open to social media payments too, compared with only one in twenty non-users.
Lack of knowledge – and worries, too
When looking at the main concerns about mobile payments, a third of respondents admitted that they simply didn’t know enough about it. As with other new technologies, this has resulted in apprehension about issues like privacy, fraud and security.
Jeremy Nicholds continued, “We’re witnessing a huge surge in interest from consumers in the UK for faster and more convenient payment methods as mobile and online commerce technologies continue to evolve at pace. This is why Visa Europe spends more than €200 million in on innovation including a number of secure payment technologies such as tokenisation to address security and convenience.
When it comes to money, concerns over control and security are understandable though a simple lack of knowledge is often an underlying cause, and consumers are quick to see the benefits of convenience. We’ve seen this with contactless card adoption – once people learn about the technology, see others using it and get used to paying with it, usage soars.”
Friction at the point of sale
Visa has invested a lot of money in mobile payments, with services like Apple’s ApplePay slowly beginning to get traction. But its the retailers themselves, who’ll have to invest heavily in new Point-of-Sale infrastructure, something they’re currently reluctant to do as consumer interest is still a long way away from critical mass and many moving to online buying anyway.
The problem with mobile payments and a point may industry commentators always make is that its solving a problem that simply doesn’t exist. Cards are easy to use, quick, familiar, have virtually 100% adoption everywhere, are cheap and free to replace. Who’ll buy you a new phone if it breaks or gets stolen?
You’re also far more likely to be mugged for that nice expensive smartphone than a piece of plastic.
But let’s not forget, suppliers like Visa and MasterCard get huge amounts of money from retailers and don’t want to lose out, should mobile payments take off.
And let’s not forget the threat posed by PayPal – but that’s a topic for another day!
About the ‘Mobile Money’ report
The mobile money research was conducted between 30 April and 20 May 2015 in six European countries: Finland, France, Germany, Poland, Spain and the UK. The total sample size was 12,015 consumers, approximately 2,000 respondents per country.
For more information, visit www.visaeurope.com and @VisaEuropeNews
[*] Figure calculated from ONS Population Estimates for UK, England and Wales, Scotland and Northern Ireland, Mid-2013 release and research figures from Visa Europe’s Mobile Money report.
Could London overtake Silicon Valley as Crypto-currency’s centre of excellence?
Well, Visa thinks so. it hosted a gathering of crypto-currency start-ups and other interested parties to its Digital Catapult event in London recently.
Visa’s not alone in thinking this. An expert from the London School of Economics (LSE), one of the most respected financial academic centres in the world believes it too. They even put a date on it – 2020.
Crypto-currency set to explode?
Investment in crypto-currency start-ups in 2015 could even beat the dotcom frenzy of a few years ago.
A technology called Blockchain has the potential to transform the future of payments in the banking sector – it may even transform way we cast and count our votes in the 2020 General Election.
Financial observers have been waiting for the next big thing for a while now. Mobile payments has failed to catch the imagination of consumers, despite the presence of heavyweights like Google with Google Wallet and Apple with ApplePay, its not seeing the level of growth that the hype suggested. Maybe crypto-currency will.
Visa meets the future
Visa’s Europe Collab launch start-up innovation hubs in London and Israel are there to spot and engage with Europe’s top financial technology entrepreneurs, as the UK is now Europe’s fastest growing region for fintech with over 135,000 employees. Deal-volume, mostly out of London, has been growing at an annualized rate of around 74% since 2008, compared with 27% globally, and 13% in Silicon Valley, according to Accenture.
Speakers at Visa’s London event included leading monetary academic Garrick Hileman from the LSE, Hendrik Kleinsmiede of Visa Europe Collab one of Europe’s crypto-currency and Blockchain gurus in the financial services sector and Nicolas Cary, co-founder of Blockchain, one of the world’s best known BitCoin wallet company.
According to Garrick Hileman of the LSE, “BitCoin is in a battle with more than 600 crypto-currencies. The governance structure in Europe and the US surrounding BitCoin may be an inhibitor to expansion for crypto-currencies whilst it may flourish in fertile territories like Sub Saharan Africa with over 50% of BitCoin mining being provided by China.”
The UK is leading the way
Sian Jones of COINsult feels “The UK is the only jurisdiction that is coming out with a holistic approach to digital currencies regulation.”
While according to Hendrik Kleinsmiede of Visa Europe Collab, “The level of investment in crypto-currencies is at an unprecedented high – to date over $667million. If you compare 2014 to 1995 at the beginning of the dotcom boom, there’s now more money being invested in crypto-currency than there was in dotcom.”
Will the Banks jump in?
Nick Cary of Blockchain noted “Banks are being exceedingly cautious but by summer there should be new policies in place to make it easier for BitCoin companies to operate in Europe and the US.
The US is seeking a compliance pathway for Bitcoin start-ups, with New York setting the future as the model for regulation of Bitcoin “banks.”
Great news, but let’s not forget what became of the dotcom boom…