Mobile wallet technology has been around for 10 years or so, but recently it seems the world is going wallet crazy. The global mobile wallet market is projected to grow at an annual growth rate of 36,8% over the next four years, according to RNR Market Research.
The global mobile payment transaction volume is expected to reach US$721 billion in 2017, up from US$235 billion in 2013. Paypal, the leading provider of wallet services, has 162 million active wallets.
Africa ranks second in the world in terms of mobile money usage by continent. Mainly thanks to the efforts of Kenyan mobile payment pioneers, M-Pesa, yet South Africa, with the most developed financial services industry on the continent, lags in mobile payments.
The mobile commerce boom South Africans are patiently awaiting may be a step closer, as Apple Pay goes head to head with Android Pay, and their respective wallet offerings Passbook and Google Wallet, eye the local market.
What does this mean for the trusty old leather wallet and purse?
South African electronic payment experts believe the time is right for local shoppers and retailers to adopt the technology as Mobile Wallet services have the potential to provide convenience, security and loyalty.
Mel Gischen, marketing manager at PayU, a leading electronic payments company, says that SA has a large number of young adults who have been using mobile phones to access services for a number of years and they are getting more comfortable with paying via their phones, tablets and PC’s.
“The mobile phone user adoption curve is at a point where we have a sufficiently large enough group of consumers in SA who are comfortable with making payments via internet and mobile devices to make the Mobile Wallet service viable,” says Gischen.
The high rates of mobile phone users in South Africa, approximately 59 million according to Wikipedia, means that user education is not a barrier, even though a 2015 World Wide Worx survey found internet browsing via phones at a surprising 40% in South Africa.
South Africans have already been exposed to Wallet initiatives like SnapScan, MasterPass, Zapper, Flickpay, eWallet and of course M-Pesa and PayPal.
These Mobile Wallets help users to be financially connected. And, importantly in South Africa, these two forms of transactions are accessible to those with or without bank accounts. Making huge strides in reaching the seven million people in South Africa who, according to Vodacom’s estimates, earn salaries but do not have their own bank accounts.
In addition to mobile payments, a mobile phone subscriber can deposit value into their mobile account, send value via a simple handset to another mobile subscriber and allow the recipient to turn that value back into cash.
Gischen believes successful adoption comes down to three key factors; sufficient users, sufficient benefits and sufficient pay points.
Mel Gischen continues, “We are already at a point where there is sufficient density of wallet pay points where wallets can be used around the country.”
A recent report by US insights company, Interactions, revealed that 30% of US shoppers are already using mobile wallets to pay for goods and services. The findings also showed that mobile payments technology is evolving from a mere novelty to a necessity. And as the adoption grows, merchants are increasingly compelled to deploy the point of sale infrastructure.
The ability for most South Africans to purchase online is still skewed towards those who live in urban centres and own credit cards. This impacts e-commerce growth and hampers.
“Poor access to credit and credit worthiness of potential cardholders are the major stumbling blocks in South Africa to the issuing of credit cards. However, there are debit cards available in the market that can be enabled for e-commerce transactions to support wallet growth.”
Another factor is the large distribution of ATM’s that make access to cash easy.
PayU’s Mel Gischen believes that, “If we are to see exponential wallet growth here, companies must provide a more compelling reason for the service to be used.”
If you can notch up a date with a stranger through your phone with a single swipe, why not pay for the dinner with a quick scan or tap too?