Smart Phones and Smart Watches to Replace Credit Cards and Cash Payments

A survey conducted by the Pew Research Center and Elon Univeristy noted that most companies already involved in financial services market will try to resist the shift towards NFC technology to avoid losing market share. That being said, there are signs that some major players are on board. Visa’s recently announced “one-stop” NFC-based mobile payment solution is one notable exception to the obvious recalcitrance that major, established financial institutions would have. On the other hand, there are a few big companies, as well as a few unique initiatives, that support NFC payments. Google Wallet uses NFC technology, as does ISIS, the NFC mobile payment system backed by several mobile carriers such as Verizon, T-Mobile, and AT&T. Apple is expected to come up with a payment system of their own by the end of 2012, one that is expected use NFC as well. An alternative to NFC technology is perfectly showcased by Square’s “Pay with Square”, a payment app that relies on geofencing technology rather than on NFC. [Source, April 2012]

EXPERIENCE WITH MOBILE TRANSACTION TYPES

[Summary Table]

"U.S. adults surveyed selected the statement which best describes their experience with each of the following types of transactions."

	Done this myself / Seen it done firsthand [NET]	I have done this myself	I have not done this, but I have seen it done firsthand	I have not done or witnessed this, but I am aware that it is possible	I was unaware that this is possible
	%	%	%	%	%
Using a mobile app that allows you to redeem offers at a retailer or restaurant like you would use a coupon	26	15	11	52	22
Paying for a product or service with a credit card and having your card swiped through an attachment on the seller's smartphone	25	14	11	54	21
Using a mobile scan as an airline, train, mass transit or other transportation ticket	17	7	10	51	32
Using a mobile app like a gift card to make purchases at a retailer, restaurant or other merchant	16	6	9	54	30
Using a mobile scan as an admission ticket to movies, concerts or live theater performances	15	6	9	53	31
Processing a payment by tapping your smartphone against a special receiver at a store or other merchant, instead of using cash or a payment card	13	4	8	56	32

Note: Percentages may not add to 100% due to rounding
Harris Poll, December 11, 2012

Paying with cash or card replaced by smartphones at register

LG's new phone and watch

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Tipped to become the norm ... Paying for goods at the register using a smartphone is available now. 

August 2, 2014

News.com - Credit card signatures are now dead but, if financial experts are to be believed, cash and physical credit cards are on their way out too.

Experts predict smartphones and smartwatches will take over from both traditional forms of payment in the near future, led by Australia where one in two credit card transactions are now of the tap-and-pay variety.

Becoming more popular ... Using PayPal to pay for things with your smartphone. 

Juniper Research forecasts contactless smartphone payments to hit 9.9 billion by 2018, up from 3 billion worldwide this year, and one in five smartphones will be able to act as digital wallets.

The technology is already available in Australia, though banks, businesses and PayPal are paving the way individually, making it more difficult to understand.

The technology typically uses a secure computer chip, either built into the phone or a sticker on its exterior, and Near Field Communication technology that only transmits information at very close range.

Using these two elements, smartphones can be used in place of a credit card, with contactless transactions under $100 not requiring a PIN and insured by financial institutions.

MasterCard Australasia market development and innovation head Matt Barr said Australia now led the world in tap-and-pay credit card transactions, with more than 320,000 terminals now in stores, paving the way for smartphone payment technology.

“With contactless technology, every second transaction in Australia is a tapper now,” Mr Barr said.

“That’s really important because without that contactless payment technology in market, moving to mobile phone payments would be very hard.”

MasterCard currently supports smartphone payments through Commonwealth Bank and Westpac services, where secure chips inside two Samsung Galaxy handsets can be used in place of a credit card.

Other services use a sticker to add the chip to any phone.

But Mr Barr said those chips will not be needed in future, thanks to Google technology that encrypts credit card information into a phone’s operating system.

Already used in the US, Mr Barr said Google Wallet could be seen in Australia this year.

“I’d be expecting to see commercial services as soon as late this year, but certainly by early next year,” he said.

PayPal communications head Adrian Christie said the financial service provider was also embracing mobile payments, though not only using smartphone hardware.

Using the PayPal app, Australians can engage its Check In feature to pre-authorise a payment to a store. When they reach the counter, users tell the shop assistant they’re paying with PayPal and the assistant selects their profile photo to charge their account.

Check In payments can even be made from the Samsung Galaxy Gear 2 smartwatch.



Mr Christie says 100,000 Australian merchants have signed up to accept PayPal payments, including retail chains like Mexican restaurants Guzman Y Gomez.

“With regards to adoption, it’s not if we move to a digital wallet but when,” Mr Christie said. “It seems inevitable that there are smarter ways of making payments and they will take over.”

Six ways to pay without cash or credit cards:

-PayPal Check In: Using PayPal’s smartphone app, or smartwatch app, users can check into participating stores and authorise payment. At the counter, their photo is displayed and PayPal account charged.

-CommBank PayTags: The CBA has created a sticker, called a PayTag, one third the size of a credit card. After sticking it on to any Apple or Google-based smartphone and activating it, at a cost of $2.99, users can pay for goods by tapping the phone like a credit card.

-Commonwealth Bank and Samsung Galaxy S4: The CBA’s app uses this Samsung phone’s secure chip to transform it into a credit card that can be tapped against a terminal at check-out.

-Westpac and Samsung Galaxy S4 and S5: In conjunction with Westpac’s app, users of these two phones can tap them at the counter in place of a credit card.

-CUA and Google Android phones: Using any Google Android phone with NFC (Near Field Communication) and the redi2PAY app, users can pay with their phones at the counter. Compatible handsets include the Nexus 5 and 7, and handsets from HTC and Samsung.

-Coles Mobile Wallet: Available in conjunction with a Coles MasterCard, is this PayTag sticker that lets you use the hosted phone as a credit card.

PayPal Increases Mobile Investment as Smartphones Replace Cash

December 10, 2103

Bloomberg - PayPal is increasing investment in mobile systems as the electronic-payment service bets that smartphones will increasingly be used instead of cash and credit cards, President David Marcus said.

“Mobile is going to be at the center of your money and all the transactions you make,” Marcus said today in a interview with Bloomberg TV. “We’re doubling down on our investments in mobile.”

PayPal, a unit of EBay Inc., operator of the largest online marketplace, enables online operators and physical shops such as McDonald’s and Starbucks to process payments, mostly in North America and Europe. Going into new shops and expanding into new countries, such as Brazil and Japan, will help PayPal advance, Marcus said at Le Web, an Internet conference in Paris.

Marcus said the shift to mobile payments is a long-term transition, and PayPal, which has 137 million users worldwide, wants to become the main software system for it. Mobile payments worldwide will climb 44 percent to $235 billion this year and will reach $721 billion by 2017 according to estimates by researcher Gartner.

“It’s going to take years,” for mobile technology to become the main way to pay, Marcus said. “But we’re in it for the long run.”

Swiping iPhone 6 May Soon Replace Credit Cards, Cash

September 10, 2014

KDKA - Move over cash, and debit cards, and credit cards. Users of the new iPhone 6 will be able to access something called Apple Pay to pay retailers, restaurants, and other merchants with the flick of their smartphone.

“That’s pretty neat. I think it will speed some things up, too, so that will be nice not waiting in line as much. Everyone is always on the move,” said iPhone user Kevin Byer of Lawrenceville.

Those stores with Apple Pay will have special devices that allow you to pay for purchases by waving your iPhone 6, the latest Apple smartphone, in front of a special device.

Major retailers like Macy’s, McDonalds, Subway, Walgreens and Whole Foods have already agreed to use Apple Pay, and now PNC Bank says it will work with its customers to get credit card and debit card information onto that iPhone 6.

“You’ll actually be able to pay without reaching for your wallet. You’ll be reaching for your phone starting later this fall,” noted Tom Trebilcock, PNC’s vice president of digital.

Beginning in October, cards from American Express, Bank of America, Capital One, Chase, Citi, and Wells Fargo will work, with other banks like PNC coming on board soon thereafter.

Trebilcock says payment information on your iPhone is not quite the same as your cards.

“The underlying payment credentials, meaning the numbers that show up on your credit card, will never be on the phone itself,” he told KDKA money editor Jon Delano.

An identifier will substitute for card numbers, which PNC says makes it safer, protecting customers from the mass theft of credit and debit card info that occurred last winter.

And if that info is stolen and misused, Trebilcock says, “The same protections that are in place for your credit card are in place for Apple Pay.”

“Our security is at risk all the time anyway. I don’t know that it’s going to be that much more risky than a credit card,” said iPhone user and PNC customer David Work of Fox Chapel.

But substituting Apple Pay for cards and cash still worry some.

“I’m old school,” said David Kaminski, of Guilford, Connecticut. “I want to pay with cash or a debit card and give it to them so I can control the transaction.”

Study: By 2020, smartphones will replace cash and credit cards as the preferred payment method

April 19, 2012  

Digital Trends - Do you already use your smartphone to make daily purchases instead of cash, debit, or credit cards? If so, you’re on your way to contributing to the study that believes by 2020, mobile payment will make all other payment methods obsolete.

Seeking the opinions of 1,021 “Internet experts and other Internet users,” the findings come from the Pew Research Center’s Internet & American Life Project and Elon University’s Imagining the Internet Center. This research concluded that 21 percent of smartphone users say they already use their smartphones to pay the bill and two out of three respondents believe people will begin migrating toward the method by the decade’s end. The survey considers Near Field Communication (NFC) such as the Google Wallet technology and the Square mobile card reader as forms of mobile payment.

“By 2020, most people will have embraced and fully adopted the use of smart-device swiping for purchases they make, nearly eliminating the need for cash or credit cards. People will come to trust and rely on personal hardware and software for handling monetary transactions over the Internet and in stores. Cash and credit cards will have mostly disappeared from many of the transactions that occur in advanced countries,” the survey statement said. About 65 percent of people agreed, though 33 percent noted they do not trust devices using NFC because it will not allow people to physically swipe or enter their information in for maximum safety and reliability. 

With the recent Google Wallet hack, it’s not surprising why.



The rise of mobile payments is definitely attributed to more smartphones being made and sold, slowing easing out the old days of app-less devices. Paying with a device you already use for everything else consolidates all your belonging in one place so you don’t have to carry around a bunch of items in the future to serve various purposes.

“There is nothing more imaginary than a monetary system,” survey respondent and Harvard University professor Susan Crawford wrote. “The idea that we solemnly hand around printed slips of paper in exchange for food and water shows just how trusting and fond of patterned behavior we human beings are.”

Still, with one third of correspondents still wary of mobile payments overtaking past patterns, there are still some security fears floating about the idea. Especially with NFC devices which can access your personal information through just several taps, perhaps people are not ready to make the complete move toward a smartphone domination. Losing your wallet is traumatic enough, but losing a phone which has your bank accounts and the rest of your life in would be a bigger devastation.

Will Visa And MasterCard Capitalize On Mobile Wallet Technology?

January 2, 2013

Forbes - Mobile phones have come a long way from the (9 inches long, 5 inches deep and 1.75 inches wide) initial prototype first developed by Motorola. The modern day smartphone has had a big impact on most of our lives, with applications developed for nearly all our daily needs and wants. Mobile phones have now become as indispensable as wallets, which leads to the idea – what if mobile phones could replace wallets?

What if mobile phones could not only facilitate online payments (which they have for quite some time), but also allow you to make payments at the point of sale, essentially replacing the cash you currently carry in your wallet?

The idea is not new. Technology companies have been making promises about mobile wallets for years but have failed to deliver anything substantial. The advent or rather the adaption of near-field communication technology by popular manufacturers like Samsung seems to have given the idea a much needed impetus. The much anticipated ISIS mobile wallet developed by Verizon, T-Mobile and AT&T was launched in Salt Lake City, Utah, and Austin, Texas, earlier this year. The Google wallet has payment partnership with Visa, MasterCard and Discover Financial, but received a lukewarm reception at launch last year, possibly due to the fact that it was limited to users with Citibank-issued cards.

Let’s look at the effect of the developing mobile payment technology on payment solutions providers like Visa and MasterCard. We will discuss the market size, the potential for development and the impact that mobile payments could have on these payment giants.

See Our Full Analysis for : Visa| MasterCard

Worldwide Reach

Visa estimates that over 30% of consumer spending across the globe is still carried out through cash and checks, accounting for over $10 trillion in gross dollar volume. Taking a look at some more statistics available from Statista, we see that mobile phone payment accounts actually outnumber credit and debit card accounts. There are about 1.3 billion active credit and debit accounts worldwide with more than 5 billion mobile phone accounts.

This trend is particularly evident in developing nations in Asia (85 million mobile accounts) and Africa (58 million mobile accounts), where mobile phones have emerged as a means of extending financial services in lieu of an underdeveloped banking system. Most of these transactions involve SMS based payments, direct mobile billing using PIN and one time password authentication and mobile web payments.

The global volume of money spent using mobile phones was around $106 billion in 2011, rising to $171 billion in the current year, and is expected to grow to about $617 billion by 2016. About one-third of these payments are through credit, debit or prepaid cards already owned by customers, followed by payments directly from customers bank accounts.

In the U.S., which accounts for about half of Visa’s revenue, smartphone adaption is low, only 2.7 million Americans used mobile payments at the point-of-sale in 2011 and the average spending per proximity mobile payment user was around $61. This figure is expected to grow. Berg Insight reports that the number of point of sales terminals will grow from 4 million at the end of 2011 to 43 million by 2017, with 86% of U.S. merchants accepting NFC based payments. Almost 50 million Americans are expected to use NFC technology by 2016 with an average spend of $1,300 per mobile payment user.

But Won’t Mobile Phones Just Be Replacing Cards In The U.S.?

The growth of mobile phone payments will have a cannibalization effect on credit and debit card payment, but both Visa and MasterCard are gearing up for this paradigm shift. Along with the aforementioned partnerships with other wallet service providers, both card giants have launched their own mobile wallets: V.me and PayPass.

In addition, studies by Deloitte have shown that smartphones might actually lead to an increase in spending. A recent survey by the company revealed smartphone users are 14% more likely to complete a purchase at the point of sale than non-smartphone users. Mobile phone transactions accounted for 5% of retail store sales in 2011, this percentage is expected to grow to 19% by 2016.

Based on the growth in U.S. markets, influenced by an eventual economic recovery and increased penetration in developing markets, helped by improvements in mobile payments technology, we expect a steady growth in Visa’s payments volume over the coming years.

Our price estimate of Visa’s stock is $151, in-line with the current market price.