The Rise of Mobile Payments

  • The number of mobile payments in 2020 is growing rapidly with the impact of Covid-19 and the decrease in the use of cash
  • 1.0 billion people worldwide were predicted to make a mobile payment in 2020 (eMarketer October 2019) but that figure is now forecast to be much higher
  • Cash payments have decreased by as much as 90% in the UK since March 2020
  • Merchants and traders who previously only accepted cash must now find an efficient and cost-effective way to accept card payments
  • Yay! is a mobile payment platform that enables customers to make swift and easy payments directly with their smartphone by scanning a QR code with their phone camera
  • Yay! does not require a merchant’s customers to download an app or set up a proprietary wallet
  • Payments are made with ApplePay, GooglePay or any credit / debit card 
  • Yay! is a software only solution for merchants – no hardware required
  • Yay! is free – no set up costs – just a ‘pay-as-you-go’ transaction fee
  • Yay! is quick and easy to set up; download the Yay Charge app and start taking payments in under 5 minutes with Yay! and Stripe, our payments partner

The Mobile Payments Landscape

Mobile payments are forecast to grow rapidly globally over the coming three years becoming the second most popular payment method after debit cards. Although these figures, from WorldPay’s 2018 Global Payments report, mask a number of regional variations, it is evident around the globe, including the UK, that use of cash is in decline with mobile payments on the increase.

Whilst Alipay and WeChat dominate the mobile payments market, Applepay is also showing rapid growth with around 50% of all iPhone owners now set up for ApplePay.

Alipay and WeChat require users to add funds to proprietary e-wallets, whereas ApplePay, PayPal, Samsung, Amazon and Google all enable people to charge any credit or debit card they have, making the payment process more accessible and appealing to users

China / SE Asia

China is driving the global mobile payments industry with South East Asia emerging as the mobile payments hotspot as adoption grows fast.

In 2016, Singapore was SE Asia’s largest mobile payment market with revenue of more than $1bn but recent research carried out by Hootsuite shows that Indonesia has the world’s highest mobile eCommerce penetration rate at 76% (China 74%) and Thailand has the world’s largest mobile banking penetration at 74% (beating Sweden’s 71%).

China operates a QR code payment system in conjunction with proprietary e-wallets via Alipay and WeChat. Retailers in countries around the world, including the UK, are beginning to accept Alipay but this is only available to people with an Alipay account and is targeted at Chinese tourists. It is generally acknowledged that Alipay and WeChat are highly unlikely to move into mainstream western markets, following the resistance to Huawei and western suspicion of Chinese companies’ data access and usage.

USA

Starbucks was the US driver of mobile payments with their app, but in 2019 it was replaced by ApplePay as the dominant mobile payment platform.

Users of US mobile payment platforms (millions) – 2019

Mobile payments in the US are starting from a low base but are forecast to grow from 3% to 7% over the next three years (eMarketer)

The main deterrent to mobile payments growth in the US is cited as concerns over security with 89% of Americans saying that they do not consider mobile payments to be secure.

UK / Europe

The UK contactless payment market

has high adoption and growth, leading the EMEA market with a value of $460m in 2018 and is estimated to reach around $1.2bn in 2025.

Gen Z and Millennials are driving mobile payment growth in the UK and Europe as reported in UK Finance’s Payment Market Summary 2019.

Unsurprisingly mobile payment adoption drops with older generations but as Gen Z and Millennials ‘come of age’ mobile payments will only increase.

Research from Cardlytics (2018) showed that bigger winners in the UK mobile payments market were quick-service restaurants (11%), coffee shops (11%), public transport (11%) and bars / pubs (9%). However separate research from Worldpay indicates that fashion

retailers saw the most growth in mobile payments with an increase of almost 500% between 2017 – 2018.

London is the biggest adopter of mobile payments in the UK accounting for 7% of transactions under £30 and 5.7% of all transactions. The East of England is the second biggest adopter of mobile payments (3.3%), followed by the South East (3.2%) with Yorkshire taking fourth spot (2.9%). Data from the European Central Bank (November 2019) shows that the UK is the biggest cashless spender with more than 27.7 billion transactions in 2018, followed by France (23.5bn) and Germany (22.7bn).

Covid-19 impact: The increase in mobile payments

Customers are now demanding a seamless, hygienic and user-friendly customer experience. It is becoming a matter of survival for merchants to meet customers’ evolving needs. Merchants who do not offer convenient cashless payments will lose business as customers migrate to those who do.

Due to Covid-19, the use of cash has decreased dramatically with Link, the ATM operator, stating that cash withdrawals in the UK have decreased by as much as 90%.

As people become increasingly aware that cash is unhygienic and stores refuse to accept it, we have entered an era where the demise of cash has been hugely accelerated. A large number of retailers and merchants, who previously accepted only cash, now have to find a method of accepting card payments.

A recent survey by Amaiz, an online banking company for small businesses, revealed that 54% of Small & Medium Enterprises (SMEs) were now cashless or were planning to be. 21% of those said they had no plans to return to cash payments.

The UK ‘SME’ Market

Retailers, cafés / restaurants and service companies employing fewer than 250 staff make up 99.9% of private enterprises in the UK. That equates to 5.85 million businesses *

Delving deeper into the stats shows that 4.485 million are single-person enterprises with no employees and 1.155 million have 1-9 employees meaning that 95% of UK businesses have fewer than 10 employees.

The UK SME market is worth £2bn which equates to just under 50% of the total UK market

(*merchantsavvy.co.uk Feb 2020)

‘SME’ – Major Payment Providers in UK

Worldpay claims to have around 50% of the UK SME payments market with Barclays being another established payment provider. However, a number of disruptors have entered the UK market over the last 10 years, eating into the market share of the ‘old school’ companies by offering increasingly competitive rates. The major players are currently PaymentSense, iZettle, SumUp and Elavon.

All of the above require their merchants to have a hardware payment terminal to accept card payments. In the case of Worldpay and Barclays this is a traditional large PDQ terminal. The disruptors generally offer a mobile point of sale (MPos) card reader which is much smaller and portable.

Traditional PDQ Terminals

  • Require a fixed term contract and monthly rental cost
  • A terminal outage results in the inability to accept payments
  • Often disappointing customer service and support with a slow and unsatisfactory contractual Service Level Agreement (SLA)
  • Terminal support is often provided by a third party such as Ingenico, Spire or Verifone
  • Opening an account is a slow and laborious process
  • Pricing / fee structure is often unclear and confusing
  • Terminals can be delivered late or unconfigured

MPos Card Readers:

  • Card reader must be purchased. Cost typically £29+
  • Limited battery life
  • Often disappointing customer service via call centres
  • Merchants must connect a mobile phone via bluetooth to the card reader; this connectivity can often fail

In Conclusion

Mobile payments are the future of payments:
A combination of the rapid demise of cash and the fact that we increasingly do more and more on our phones is driving mobile payments.

Mobile payments are convenient:
Why pull your wallet out of your pocket or bag to retrieve a card when the chances are your mobile is already in your hand?

Mobile payments are safe and secure:
Mobile wallet payments are fully verified by either fingerprint or facial recognition so safer and more secure than a conventional card payment using either contactless or a PIN.

Mobile payments are hygienic:
When you pay with your mobile there is no contact with a terminal or keypad. The merchant creates a Yay! QR code on their mobile phone and the customer scans the code on their phone. Neither party touches the other’s device.

In this new ‘Covid’ world mobile payments are the future of payments.

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