Fintech/Payments Technology

UK: Have mobile payments reached critical mass?

UK mobile paymentsAfter five years or so of marketers waiting patiently for consumers to embrace mobile payments, we may finally be reaching the tipping point. After learning that mobile payments in China have dramatically outpaced mobile payments in Europe and the United States, we learn that the United Kingdom is ready to represent – since this time last year, mobile payment volume in the UK has tripled. This growth has surprised analysts due to the relatively recent introduction of Android Pay and Samsung Pay into the country. Are the days of wallets full of plastic payment cards finally drawing to a long-expected close? The evidence is mounting.

By Rick Ferguson

Here are the relevant stats, courtesy of sources rounded up by IT Pro Portal contributor Michael Moore:

UK cash payments continue to fall: According to the “UK Cash and Cash Machines 2017” report from UK Finance, UK cash payments dropped 11 percent this past year, falling to 15.4 billion transactions from 17.2 billion last year. Cash payments now represent less than half of all UK payment transactions.

Mobile payment volume has tripled: UK payment processor Worldpay revealed recently that UK mobile payment volume topped £370 million in the first six months of 2017 – 336 percent increase over last year. Mobile payments’ share of in-store transactions grew to 2.04 percent in June, vs. 1.18 percent in December 2016, and now represent 5.5 percent of all contactless payments in the UK.

Contactless payments continue to rise: Worldpay calculates that UK total contactless spend hit £9 billion in the first six months of the year, meaning contactless payments in 2017 may well double the £10 billion in contactless payments in 2016. Contactless payments now account for 38 percent of all non-cash transactions in the UK.

Money quote from Worldpay CMO James Frost:

“Mobile spending has shaken off the novelty tag, and is breaking its own spending records virtually every month. Granted there’s still some way to go before we start cutting up our cards and chucking away our wallets, but it’s easy to see why everyone from start-ups to tech giants is eager to have a stake in the technology.”

UK Finance Chief Economist Adrian Buckle, however, cautions that it may be too soon to declare cash dead:

“It is clear that over the past few years we have witnessed a significant shift away from cash use in this country with contactless cards undoubtedly causing a decrease in the use of notes and coins. However we don’t believe that the UK is on the verge of becoming cashless, as some reports have claimed. People will always want to choose the payment methods that best suit them and, for the foreseeable future, in lots of cases that will continue to be cash.”

WorldPay analysts attribute the dramatic increase in mobile payment volume to the introduction of Android Pay and Samsung Pay into the UK last summer, along with Apple’s decision to remove the £30 limit on Apple Pay transactions – moves that have collectively encouraged consumers outside of London to embrace mobile payments.

With mobile payments reaching critical mass, the battle will soon turn to share of transaction volume – and we may expect that loyalty programs will become an essential weapon in the battle for mobile payments supremacy. Money quote from Urban Airship director Judy Chan, speaking to Information Age:

“The missing link for broader mobile payments adoption is providing customer-centric value like loyalty rewards and discounts, as pulling out your phone to pay for things isn’t any easier than pulling out a card. Today, we’re answering the call, bringing loyalty rewards and payments together in a single tap experience that will enable retailers to turn transactions into relationships. Super simple auto enrollment will enable retailers to easily grow loyalty programs, while ongoing customer engagement through mobile wallet loyalty cards and lockscreen notifications will completely change how brands can communicate with members.”

As we’ve seen in the US, it appears that the convergence of mobile payments with loyalty will transform the UK loyalty landscape as profoundly as any event in the 35-year-history of loyalty marketing. We’ll be excited to keep an eye on it for you.

Rick Ferguson is Editor in Chief of the Wise Marketer Group.

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