Smartphones have evolved into a truly ubiquitous payment tool, prompting consumers to exchange their leather wallets for mobile ones. Owned by 44 percent of world population, smartphones will be used by up to 80 percent of people on the planet by 2020, according to Statista.
It is no surprise then that merchants have, in the last five years, become increasingly interested in supporting mobile sales channels. The percentage of merchants who have been an active support has grown from 54 to nearly 80 percent, according to the 2017 Mobile Payments and Fraud Survey.
According to the data gathered by Forrester Research, over the next few years the European mobile payments market will almost triple, rising from $58 billion in 2015 to $165 billion by 2021. The growth is due to several factors, including proliferation of smartphones and other mobile devices capable of mobile payments, retailer interest and investment in mobile payments solutions, as well as greater consumer awareness of and familiarity with mobile payment options and its convenience.
The Case for Digital Wallets
In 2017, spending via mobile rose 32% and purchases made with mobile wallets were expected to exceed $1.35 trillion by the end of the year. Consumer awareness had a big impact on the greater adoption of mobile payments. Thanks to the entry of giants such as Apple and Google on the market and major ad campaigns by companies such as PayPal or Samsung, consumers got better opportunities to recognize and use alternative payment options like digital wallets.
A MasterCard study from 2017 analyzed 3.5 million conversations on social media platforms, finding that digital wallets were mentioned in 75% of tracked conversations about new ways to pay.
The MasterCard study also found that people are already thinking beyond smartphones for payment options, with wearables for payments attracting the highest amount of excitement on social media among emerging technologies topics, followed by the IoT and smart assistants.
Is Mobile Channel a Higher Risk?
Fraud in the world of payments is dynamic and fast-moving, and this is especially true in the mobile channel. 40 percent of merchants have faced fraud via that channel, which is twice as much than in the previous year, revealed the 2017 Mobile Payments and Fraud Survey.
Security in mobile payments systems is still one of the biggest impediment to the wide-scale use of mobile payments. However, much of the risks regarding mobile payments lie in how customers use them. A report by Pew Research Center revealed that nearly 28% of smartphone users fail to do the most basic thing – use a lock screen on their phones. Gemalto’s Building trust in mobile apps report also shows that users are still not convinced of the need for vigilance when it comes to mobile. Surprisingly, only 53% of people think a PIN or password protects them, just over a third appreciate two-factor authentication, and only 42 percent feel encryption would help.
Nonetheless, most consumers think that the responsibility for protecting and securing customer data lies with the companies. A report from Transaction Network Services (TNS) shows that 38 percent of surveyed believes that, on some level, their private data may have been already exposed.
If we look at the data gathered by the Crown Records Management Survey, those concerns might not be so outlandish. Censuswide polled 408 IT decision makers in UK based companies of between 100 and 1,000 employees, and found that almost one in three IT workers are keeping breaches quiet by failing to report them. Successful cyberattacks on big companies, such as the infamous massive data breach in Uber – which happened in October of 2016 and was disclosed more than a year after the fact – only add to the distrust and paranoia-like concerns.
Consumers have clearly made the decision that they are prepared to take risks when it comes to their security, but should anything go wrong they put the blame with the business.
In an age where information is precious commodity, everyone becomes responsible for data protection. The upcoming European Union General Data Protection Regulation (GDPR) will provide the foundation for taking responsibility and being accountable when it comes to dealing with European citizens’ private data. From May 2018, when the GDPR goes into effect, businesses all around the world will face huge financial penalties for failure to disclose data breaches. The GDPR also brings a new set of “digital rights” for EU citizens in an age when the economic value of personal data is increasing in the digital economy.