The overarching fact in the consumer-facing side of payments, is that the rise of new mobile technology has shifted away the power from banks and payment providers to the consumer. With companies vying for/ trying to keep market share, consumers have the choice and power to decide which methods of payment are most convenient to them and when they want to pay. What the Industry has also observed is that a single consumer may wish to pay in a number of ways, depending on what they are buying and how they are transacting. So for example, Jane Smith may wish to transact via Paypal when bidding on eBay, pay via her Starbucks loyalty app in the coffee shop and tap her NFC-enabled card at the train station. The way consumers want to pay, however, is driven by two key factors; convenience and incentives.

Convenience

Looking at the convenience element, we can see that the adoption of contactless card payments reached £2.32 billion over 320 million transactions in 2014, up 255% from £653 million (over 100 million transactions) the year before. Retailers are seeing that contactless payments are reducing queuing times and is the preferred payment method for many shoppers. Retailers continue to install more contactless terminals, which is further incentivised by the limit increase expected in September this year. The issuance of contactless cards is also on the rise with 58 million cards being in circulation as at the end of 2014, a 52% rise across the year. However, contactless cards still require you to take the card out of your wallet, usually, for the avoidance of card clash, or you would at least have to take out your wallet to tap. So now with the rise of NFC enabled phones, many people see this as the new wallet (so much so that Apple has just renamed it’s Passbook!).

Mobile Wallets

Apple Pay launched in the US in October 2014, and it was finally announced last week that it’s coming to the UK next month. This side of the pond, it will be available in over a quarter of a million locations with M&S, Boots and McDonalds amongst the high street names to have signed up. RBS and Natwest are amongst the early bank adopters; but whilst Apple Pay appears to be creating the most noise in this market, there are many competitors fighting for market share (such as Android Pay/ Google Wallet, Samsung Pay, LoopPay, Plastc) — and all this against a backdrop of increasing popularity of Android systems. The growth of this market will be rapid (c. 30% CAGR for the next few years) and it is estimated that by 2018 the mobile wallet market will reach a cool $1.6 trillion in value.

Wearables

The biggest noise created by Apple hasn’t been Apple Pay though, the Apple Watch has taken media coverage by storm and sold out within an hour of Apple taking pre-orders. A key feature of the Apple Watch (apart from telling the time) is its Apple Pay integration allowing the user to pay via a tap of the wrist. They are not alone though, with American Express announcing its collaboration with Jawbone in April 2015, and Swatch announcing its smartwatch with NFC capabilities in May 2015 which should be available in August this year. Wearables are more easily accessible and fit into more ‘human’ movements that disconnect us from the thought of paying — as ultimately no one wants to pay, they just want the end result. The more designers and the payments industry remove the sensation of paying for the end user to create a seamless process from desire to fulfilment without the consumer realising the intermediary steps, the happier the end user and retailers will be. Wearables are key to creating this ‘frictionless’ society.

Incentives

Additionally, consumers want to feel like they are getting a real bargain; more than that, they want to feel special and that they were selected to receive the offer. Personalisation and consumer data tracking are now prerequisites for brands and retailers to retain and grow their customer base. These organisations could use incentives which would sway your method of payment — cashback when you use your American Express, discounts if you pay with LoopPay or your smart watch. We have already seen this in the credit card market where consumers chose to use the card with the greatest/ most relevant incentive, but we are yet to see where wearables, NFC technology and mobile wallets influence consumer choices.

In summary, we are trending towards collaboration between multiple parties in the payments and rewards ecosystem to enable, one day, a frictionless payment society where consumers will not necessarily ‘feel’ like they are paying, but will be confident that they are using a payment method that is simple, fast, convenient and offers them the best rewards possible. My money is on wearables for physical transactions, as long as the design/ aesthetics element is factored in (the industry should have learned its lessons from Google Glass). For online payments, perhaps camera and voice recognition will lead the way but with so many emojis out there, what the secret password will be is open to hipsters’ and hackers’ imaginations for now.