It’s crazy to even imagine that there was time before the likes of Amazon was at our fingertips! When the company started selling books online in the 1990’s, it had an extremely big hurdle to overcome: getting their customers to feel comfortable enough to provide their credit card information over the web. One solution that has emerged from this is the digital wallet. A digital wallet is essentially a software that allows eCommerce retailers or payment service such as PayPal to securely store your credit card or bank information. When you are ready to make a purchase you then don’t need the card to hand as you can unlock your payment with just a password and now even with just a scan of your fingerprint.
Now that smartphone apps such as Google Pay and Apple Pay bring the convenience of a digital wallet to mobile payments at the physical checkout, could we be on our way to be a completely cashless economy?
We Are Experiencing Trial And Error In Mobile Payment Technology
The technology that powers mobile payments, near-field communication has been in development since the 1980’s so probably a lot longer than you first thought. It’s the technology that allows your phone to communicate with a card reader when its held in a close proximity.
The history of mobile payment companies is littered with dead ends. Of the eight ways to pay with your mobile phone which include the likes of PayPal, Venmo and Dwolla, about half, however, no longer exist or are so obscure that I will bet you will probably have never heard of. Back in 2003, Mastercard launched PayPass (later Mastercard Contactless), an NFC-enabled credit card that you could tap instead of swipe. In little more than a decade, the tap card has now been phased out, folded into Google Wallet (now Google Pay), illustrating the trend toward consolidation in the digital wallet space.
The early proliferation of different NFC payment systems presented an issue for brick-and-mortar stores and restaurants. Customers may be willing to create digital wallets by entering their credit card information at a dozen or so different eCommerce websites. They’re less likely to adopt several different mobile payment systems to accommodate the needs of different brick-and-mortar retailer, so the emergence of dominant mobile payment systems with cross-compatibility was necessary for broad adoption of digital wallets in the offline world.
We are experiencing trial and error in mobile payment technologyTweet this now
U.S. retailers have been much slower to adopt this technology than their counterparts in Europe, Japan and elsewhere. While many grocery stores and large chains have installed NFC-enabled readers at checkout, most small shops still don’t have NFC-enables readers.
Convenience and security drive adoption of digital payment systems.
Mobile-payment apps are hard to hack. They provide a higher level of security than plastic credit cards, which can be stolen and counterfeited.
For the consumers who are already carrying a smartphone and let’s face it, that’s a large number of people, digital wallets reduce the chance of a lost or stolen credit card by letting you leave it at home. As a bonus, paying with your phone is a lot quicker than actually having to insert your card (as let’s be honest who has an extra 10 seconds these days?).
Digital payment technology has facilitated the rise of the gig economy. With apps such as Venmo and PayPal, the means to accept electronic payments are easily accessible to even the smallest entrepreneurs.
So, Will Hard Currency Disappear?
As online shopping and mobile payment technology make electronic payments more and more convenient, cash seems to be coming out the big loser. A 2014 Bankrate survey found that almost half of the respondents carried either no cash or less than $20. In answer to a 2016 Gallup poll, only 24% reported making most purchases with cash compared to 36% in 2011.
The ease of accepting payments through a smartphone with services such as Square has made it possible to pay with credit places that were traditionally cash only, such as street fairs and farmers markets. Even a few enterprising homeless people have begun accepting donations via credit card.
Without carrying hard cash in our pockets, the places where we would traditionally drop a few coins here and there now suffer, including buskers, church collection plates and also employees who rely on cash tips. Groups that have traditionally received cash donations are now scrambling to rethink the way they now collect funds.
Cash, however, does have its downsides. It’s tempting for thieves and easily transferable. Once you lose cash, it’s more than likely it’s gone forever. The bills in your wallet are a finite resource so once they’re gone and you are out of money if you don’t have a digital or plastic back up.
Now, thinking logically, cash isn’t likely to disappear any time soon, but eCommerce has helped put digital wallets squarely in the comfort zone for most consumers. Among millennials, electronic payment is a no-brainer, which means someday, probably sooner than we expect, the only cash in your pocket will be virtual in your digital wallet.