Written by Arnav Gupta
Nowadays, when you go to your local grocery store, you will almost always see the tap-to-pay logo on the payment terminal, urging you to tap your card instead of swiping. It is no secret that the usage of mobile wallets, most notably Apple Wallet, has skyrocketed over the past eight years. In 2021, the mobile money industry processed $1 trillion worth of consumer transactions, a 31% increase when compared to the same figure from 2020 (GSMA). This drastic rise in usage can largely be attributed to the COVID-19 pandemic, as buyers and sellers alike shifted towards contactless payments (George and Sunny). The onset of mobile payments and other transactions has the potential to permanently alter how consumers participate in daily economic activities, with more than half of the world expected to use mobile wallets by 2025 (Boku).
In the United States, the mobile wallet market is noted by some key players: Google Pay, AmazonPay, ApplePay, Venmo, Zelle, and CashApp. These services allow users to manage various financial activities directly from their mobile devices (Bertha). While adoption can be largely credited to the COVID-19 pandemic and the subsequent need for social distancing, these apps and services also prove to be more accessible for users, with Apple Wallet and Google Pay already installed on smartphones, and apps like Venmo and CashApp simply requiring a download. In the Apple Wallet for example, users simply need to take a photo of their card and it will be available to digitally use.
Economically, mobile wallets offer better financial security for retailers, as they can limit the amount of physical cash in their establishments. Additionally, while also being far more accessible to consumers, mobile wallets offer advantages simply through digitally-exclusive promotions. For example, if consumers use Apple’s Apple Card digitally through the Apple Wallet, consumers obtain more cash back on every purchase as compared to using the physical card also provided upon registration. On top of convenience, mobile wallet usage offers a higher level of security, as consumers can make contactless payments without revealing card information (Legters).
Since 2017, mobile wallet usage has led to an increase of roughly 3.5% in credit and debit card sales for small merchants as compared to larger ones (Agarwal, Wenlan Qian, Xin Zhou). This trend indicates a very positive future for small businesses across the country, as the steady increase in mobile transactions will lead to greater exposure for America’s up-and-coming entrepreneurs. The wide range of accessibility characteristics associated with mobile wallets allows consumers to support smaller businesses with less exposure much more easily. To be more specific, people who may not even have access to a bank account can easily set up a mobile payment and start shopping. Additionally, proof of income and other security factors like address may also not be necessary
However, while mobile payment adoption has increased at a staggering rate, there are still some major instances holding the technological service back. Many sit-down restaurants and similar establishments have not embraced mobile payment, gas stations have not yet upgraded all payment terminals, and Walmart, one of the largest retailers in the country, is continuing to promote their own payment service rather than more standardized ones (Cohen).
With that being said, the benefits seem to far outweigh the consequences. Some of the improvements noted by users involved in mobile transactions are, innovations in customer experience, increased encryption, better financial tracking, and expansion of customer reach, just to name a few (Forbes). All of these factors can also be expected to continue to improve and offer more advanced data for users, all contributing to the rampant digital wallet revolution. For example, when viewing the Apple Card in the Apple Wallet app, you can track when payments can be made with the lowest interest rates, as well as track your total cash-back.
The widespread adoption of mobile transaction systems also leads to job growth. In the software engineering world, an increasing number of consumers are relying on AI-procured financial services to help manage their personal finances (CB Insights). Greater need for AI developers, as well as overall software development specialists will lead to more job opportunities at large technology firms such as Apple and Google.
There is an environmental incentive to using digital wallets as well. With most credit and debit cards being made of plastic, millions of card holders every year contribute to extreme amounts of plastic collecting in landfills. The narrative is starting to shift, as a 2021 Visa study found that 85% of consumers expect digital options when they shop in person, ranging from contactless credit cards to mobile payment apps and mobile wallets (Rathner).
All in all, regardless of the few instances limiting full-scale adoption, the mobile payment industry has revolutionized economic transactions forever. From consumers leaving the house left often and paying online, to small businesses gaining more exposure, and more digital credit and debit cards being introduced with their own unique perks, the overall mobile wallet system looks like it’s here to stay. However, opponents to this movement cite distrust in current security systems and technological inconsistencies, leading them towards continued use of plastic cards at their local coffee shop.
Works Cited
CB Insights. “The Future of the Wallet: How Ai Advisors, Digital Ids, and Wearables Are Turning Mobile Wallets into the next Super Apps.” CB Insights Research, CB Insights, 22 Mar. 2022, https://www.cbinsights.com/research/report/future-of-the-wallet/.
Elie Bertha August 16, 2022. “Why Mobile Wallets Are the Future of Commerce.” Thunes, 14 Sept. 2022, https://www.thunes.com/why-mobile-wallets-are-the-future-of-commerce/.
Gemma Ryles Contact via Twitter, et al. “What Is Apple Tap to Pay?” Trusted Reviews, 11 Feb. 2022, https://www.trustedreviews.com/explainer/what-is-apple-tap-to-pay-4209063.
George, Ajimon, and Prajod Sunny. “Why Do People Continue Using Mobile Wallets? an Empirical Analysis amid Covid-19 Pandemic.” Journal of Financial Services Marketing, Palgrave Macmillan UK, 6 Aug. 2022, https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9362066/.
lam/Reuters, stephen. “Wait, When Did Everyone Start Using Apple Pay?” The Wall Street Journal, Dow Jones & Company, 23 Aug. 2022, https://www.wsj.com/articles/apple-pay-iphone-wallet-apps-11660780139.
Legters, Bob. “Consumer Ownership of Digital Wallets Is Surging, but Will the Trend Hold?” Forbes, Forbes Magazine, 29 June 2021, https://www.forbes.com/sites/boblegters/2021/05/19/consumer-ownership-of-digital-wallets-is-surging-but-will-the-trend-hold/?sh=11b894be4980.
Lindsay Anan Serves organizations in financial services and technology on strategy, et al. “US Digital Payments: Achieving the next Phase of Consumer Engagement.” McKinsey & Company, https://www.mckinsey.com/industries/financial-services/our-insights/banking-matters/us-digital-payments-achieving-the-next-phase-of-consumer-engagement.
Panel®, Expert. “Council Post: 15 Exciting ‘Side Effects’ of the Mobile Payment Movement.” Forbes, Forbes Magazine, 20 June 2022, https://www.forbes.com/sites/forbesfinancecouncil/2022/06/17/15-exciting-side-effects-of-the-mobile-payment-movement/?sh=517da3c66a44.