The next evolution in mobile payments

If my wife had said to me 10 years ago  I would wake up at 3am to watch the launch of a new mobile phone on the other side of the world,  I would have told her she was crazy and gone back to watching reruns of Seinfeld.

"The rapid growth of contactless payments shows us how quickly the jump to mobile will happen."
George Lawson, Head of Emerging Products & Innovation at Visa

As is usually the case though, she was right.

The launch of the Apple iPhone 6 and Apple Watch was a significant day – and not just for the tech community, innovators and futurists.

It was exciting for all of us because the mobile phone has become central to how we live our lives. It is a social media manager, personal assistant and general know-it all. It is a DJ and a GPS. And now thanks to Apple, your iPhone is a wallet.  

Online and mobile commerce is experiencing incredibly rapid growth, unlike anything we’ve seen before. This growth is driving new business models that combine the face-to-face, online and mobile shopping environments. The mobile has become so central that it’s a natural evolution for it to be incorporated into how we shop.

One of the standout examples of the new mobile-based shopping experience is Starbucks. Their mobile payment app is widely regarded as one of the most successful in the United States, not only for delivering a convenient customer experience but for creating a digital loyalty program that integrates with the payment process.  

It captures customer purchasing data and, in turn, pushes out personalised offers. According to Business Insider, an average of six million mobile payments are made in store at Starbucks each week and this now represents over 15 per cent of all the company’s face-to-face traffic.

Closer to home, mobile payments are set to make a big impact as payments systems evolve and consumers embrace new ways to pay. The rapid growth of contactless payments shows us how quickly the jump to mobile will happen.

Mobile proximity payments (using your phone to pay at the point of sale) work using the same acceptance infrastructure as contactless and consumers are becoming readily accustomed to faster, easier transactions.

Australia is leading the world in contactless payments. According to Visa data, half of Visa’s face-to-face transactions in Australia are now made using Visa payWave. New Zealand isn’t far behind, with two million Visa payWave transactions a month and climbing.

Across Asia, there is great variation in electronic payments adoption but we can see clear potential for contactless solutions as well as developing mobile point of sale (mPOS) in markets where cash is still king.

The ability to accept payments using a mobile device opens up a world of possibility for merchants, small businesses and even individuals to transact electronically for the first time.

What will ultimately drive the adoption of mobile payments, however, is the customer experience. When consumers are offered a solution that’s more convenient than what they’re currently using, they’ll change.

Of course, in this age of high-profile data breaches, trust and security are paramount for consumers, particularly when they’re shopping on their phone or tablet. At Visa we believe tokenisation is the technology that will provide a secure environment to drive greater innovation in online and mobile commerce. 

Tokenisation replaces the sensitive payment account information found on plastic cards with a digital account number or ‘token’. Because tokens do not carry a consumer’s payment account details, such as the 16-digit account number, they can be safely stored by online merchants or on mobile devices to facilitate ecommerce and mobile payments.  

This brings us back to the launch of the iPhone 6, which provides an example of tokenisation in action. Apple Pay, which is supported by the Visa Token Service, gives financial institutions (first in the US and eventually abroad) the ability to add Visa debit and credit cards to Apple Pay. Consumers will be able to securely make payments without their personal account information being at risk.

The security that tokens bring to the payments ecosystem creates an opportunity for mobile payments today and for the devices that we’ll use in the future.

We don’t know what that next device will be but you can bet that we’ll be waking up in the middle of the night for that too.

George Lawson is Head of Emerging Products & Innovation at Visa.