Customers in the UK now use contactless card payments for about 90% of face-to-face transactions, according to research by Lloyds Bank.
In June 2019, contactless made up 65% of face-to-face transactions.
By June 2022, it stood at 87%.
This puts the UK ahead of many other countries for the adoption of contactless payments.
But while contactless card payments have penetrated almost the whole payment market, it leads to the question:
Where do we go from here?
Well, a new report by PWC has hinted at the future of payments, predicting digital wallets and trying to increase trust in digital payment technology is the next challenge.
In this blog, merchant services and card machine provider Handepay examine the findings by PWC, highlighting the critical areas of interest for businesses.
Digital wallets are the next preferred payment method in waiting
The last few years have been about the rise of contactless card payments. But digital wallets have been gaining momentum in the background, particularly among younger consumers.
A digital wallet is a smartphone app that allows users to sync their payment information (and other accounts) with their phone via a mobile wallet like Apple Pay or Samsung Pay.
These wallets allow consumers to complete purchases using their phones or other smart devices (like watches) rather than presenting their payment card.
They’re highly convenient because it not only means you don’t need to carry any cash or physical wallets, but you can use those same digital cards for online purchases as well.
And more than three quarters of consumers are already taking advantage of the technology, according to some studies.
According to PWC’s study, the use of digital wallet transactions increased by 7% in 2020.
And 86% of those surveyed predict that more traditional payment providers will work closely with fintech companies to develop better digital or mobile wallet technology.
As smartphones continue to become a central part of life, digital and mobile wallets are sure to take on contactless cards as the primary way of paying for goods.
Improving trust in the digital payment industry
With more emphasis on mobile wallets and digital payments, PWC predicts it will lead to a refocus on winning trust with consumers among banks and payment processors.
In particular, PWC predicts more focus on mobile wallet inclusion and banks taking a more significant role in ensuring privacy remains central to payments.
This makes sense.
While ultimately mobile wallets don’t need to be linked to a traditional bank account to authorise payments, it’s primarily the banks that hold the customer information.
And with most customer scepticism around mobile and digital payments focusing on privacy and security, more needs to be done to reassure customers that these digital payments are safe.
Mobile and digital technology are primed to disrupt the payment industry
Payment technology is always fast-paced, but with new regulations like PSD2 opening up opportunities for more disruption and introducing more payment products, the industry is poised for even more developments in the near future.
With customers ditching cash and now looking ahead to digital and mobile wallets, payment providers and businesses face a tough time keeping pace and ensuring they provide the type of payment experience customers want.
The future could be extremely bright for those who get it right on payments.
