Cashing in on mobile wallets


  • TECH
  • Wednesday, 21 May 2014

They might be struggling to find users at the moment but according to a new report, mobile wallets are expected to be supported by 20% of smartphones within the next five years. 

Electronic and mobile wallets have so far failed to catch on despite heavy helpings of hype, as their unique selling point — the reason why someone would want them — is less than clear. 

If anything, credit and debit cards are much more practical and easy to use than a smartphone running an app and neither needs to be plugged into a power socket to be recharged every night. 

Therefore it comes as little surprise that less than 10% of smartphones support any sort of mobile wallet functionality at the moment. 

However, according to a new report form Juniper Research, that is set to change. It forecasts that by 2018, one in five smartphones will boast mobile wallet functionality, and that one third of that total will support contactless payment too. 

Juniper claims that much of this growth will come from emerging and rapidly developing consumer markets where SVAs (Stored Value Accounts) are already proving popular, particularly with consumers that don't have traditional banking facilities. 

An SVA can be a card ‘topped up' with cash that can be used in shops and stores and online for making purchases — think gift cards or even metro passes. 

Being able to manage these cards via a smartphone or replace the card completely with a handset that offers live balance updates and other financial management tools, such as receiving top-ups from friends and family, will help mobile wallets take off in areas such as sub-Saharan Africa and Latin America. 

In Western Europe and the US, Juniper's report outlines HCE (Host Card Emulation) as the main driving force behind higher mobile wallet adoption rates. HCE is a software architecture that allows potentially any app to communicate with a point of sales terminal in a store via NFC (Near Field Communication) and which is integrated into the latest version of Google's Android operating system, KitKat. 

Smartphones that support NFC for tapping on a point of sales terminal are nothing new: for example, the first version of Google Wallet, launched back in 2011, did just that. An account was linked to the app and then payment was made and validated by tapping a handset on a pad. 

However, it was a very limited implementation of the technology, and merchants needed to upgrade to new equipment to support the feature. Unsurprisingly, it hasn't caught on, yet. 

But many consumers in developed markets have physical wallets overflowing not just with different credit and store cards but also with any number of reward, loyalty and membership cards. 

The third potential area of growth, according to Juniper, is in person-to-person (P2P) payments. Gmail users in the US can e-mail each other money, while in the UK, something called Paym has just launched that allows consumers to send each other money with nothing more than a text message. 

There are also some start-up firms that offer apps that focus on a single financial element and that are proving popular with younger, digital native consumers. For instance, splitwise is an iPhone app that automatically splits bills, be they for utilities or eating out, and keeps track of what everyone owes. 

Juniper believes that features like these, when integrated into mobile wallet offerings, will also help boost their appeal. — ©AFP/Relaxnews 2014 

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