Digital wallets slowly gathering momentum

By Helen Fowler

After a disappointing Christmas for the brick-and-mortar divisions of several leading UK retailers, the era of the digital wallet looks set to gather pace.

"Smartphones are becoming the centrepoint for customers' engagement with many brands," says Dan Wagner, chief executive of mobile payment solutions specialist Powa Technologies. "Supermarket chains should address this situation as soon as they can. Smartphones are reshaping the way in which consumers are interacting with retailers."

Customers abandon an estimated £50 billion worth of merchandise at check-outs in the UK, according to research cited by Zapp. Using a digital wallet may speed up the payment process, giving customers less time to change their minds and back out of a

Mobile wallets hold several advantages for consumers as well. They can be convenient -- if you don't have enough cash for a purchase and have limited ATM access, you can use your phone to make the payment. And mobile wallets offer a certain amount of safety, as your money is stored on your phone rather than on your person in the form of easy-to-lose cash.

But other security concerns remain an obstacle for digital wallets. Market research firm Chadwick Martin Bailey asked nearly 1,500 smartphone owners what's keeping them from adopting mobile wallets and what it would take to change their minds. The survey found mobile wallets that guarantee theft and fraud protection were the ones best positioned to drive adoption among consumers.

Fear of being defrauded is a key hurdle to adoption, says Jim Garrity, senior vice president at Chadwick Martin Bailey. As more consumers gain confidence in the payment technology, that fear is likely to dissipate, he adds.

Mobile wallet providers
Mobile payment provider Zapp is teaming up with many of the UK's leading financial services brands to implement its mobile payment service. HSBC, first direct, Nationwide, Santander and Metro Bank will roll out Zapp mobile payments to 18 million customers across the UK.

When customers reach the checkout of a shop accepting Zapp payments, they will have a special code sent to their mobile phone. They can then confirm the transaction with the tap of a finger. The app follows in the footsteps of Pingit, a rival service run by Barclays Bank.

Zapp is teaming up with payment processor WorldPay, which Zapp says will lead to faster checkouts, less fraud and lower cost of sales for shops signed up to the scheme when its app launches later this year.

Zapp's app follows in the footsteps of Pingit, a rival service run by Barclays Bank. Pingit allows users to pay bills and send money instantly to friends and family. You can send up to £1500 and receive a maximum £5000 daily using the service. You can also send money abroad to selected countries at no extra charge.

PayPal is working on a mobile payment app as well. It works by highlighting nearby shops and restaurants that accept PayPal. When you click on the desired retailer, the app checks you in, allowing your name and photo to appear on the shop's payment system when you are ready to pay. The retailer charges you by clicking on your image. You receive an alert on your phone notifying you of the purchase, and an email receipt.

A spokesman for Barclaycard says the bank is also looking to enter the electronic digital wallet space. The initiative would involve Near Field Communication (NFC) technology.

"Making payments easier for consumers is something we would welcome," says the Barclaycard representative. "We are looking at how we can enter the electronic space without the need for cards."
In November 2013, Nationwide Building Society launched, a digital wallet that allows customers to make online purchases without inputting their card details each time. Created in conjunction with Visa, the service allows customers to into credit and debit cards into the digital wallet app just once and then use the app to make purchases online.

See related: More Brits shopping online, but still wary, New mobile payments partnership enters the fray

Published: 22 January 2014