What is... | May 11, 2015

What is a mobile wallet?

Often you don't need physical notes and coins to pay for things as you go about your day. Digital "cash" can instead be loaded onto what's sometimes called a mobile wallet.

Users of the London Underground don’t need a paper ticket to travel these days. At the gate, one option is to swipe a smartphone to pay for the ride, provided the device has near-field communications embedded and is equipped with a contactless payment app.

This might sound very dated in years to come but in 2014 the technology was radical enough to make news headlines. It is an example of the mobile wallet in action – the use of which is tipped to rise.

One step at a time
Not only is the “tap and pay” of the London Underground a use of a mobile wallet, sending money to friends or buying online using a mobile payment button can be as well. In April 2015, mobile wallet ING Bazar launched in Romania, combining payments, merchant loyalty cards and targeted offers from retailers.

However, the ability will be introduced to different countries at different times – so some might be more popular in certain places and unavailable in others. Mobile wallets can be seen as part of the evolution in the way people use money. Many of us have moved from a world of mainly cash payments to one of ATMs and debit cards. Now we have apps, contactless payments, mobile banking and many other developments.

The ING International Survey on Mobile Banking 2015 examined the use of mobile wallets as part of the “mobile payment app” section. Defining mobile payment apps to include digital wallets (such as Google Wallet and Apple Pay), smartphone apps from retailers that shoppers can buy with and mobile payment buttons, the report found that 51% of respondents who own a mobile device expected to use a mobile payment app in the next 12 months. The main reasons respondents had used a mobile payment app were speed and ease, while the main objections to use were lack of trust and opportunity.

What do you mean by “mobile wallet”?
Given the technology is evolving at a rapid pace and in a different way in different countries, there is no single, universally agreed definition of a mobile wallet. A 2013 Reserve Bank of Australia analysis described the global landscape as populated by often-unrelated mobile payment types, with different trends appearing in emerging and developed markets. Mobile wallets are different from mobile banking, but sometimes the two are confused with each other.

I left my wallet at home…
As a result, accidentally leaving your wallet at home might be less of a problem than it once was. After all, there are more ways to pay. Instead of being stuck without a wallet, you can simply choose an alternative option (as the London Underground example shows). Other contents of a physical wallet – such as loyalty cards – might even be replicated in a mobile wallet in some cases.

On the flipside, this ease of spending may have unexpected consequences – such as reducing the “pain of paying” felt when handing over cash. As with so many financial choices and new technologies, it may pay to be alert to avoid surprises and remember that different options may suit different people and circumstances.

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eZonomics team
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