Consumer sentiment backs mobile wallet

It was interesting to read that the FSA has warned retail banks to update their payment methods to improve customer service. In letters written in January the regulator urged banks to move with the times and away from outdated technology in order to better engage with customers.

This is a sentiment I have been talking about for a while now and it seems that the FSA agrees. The payments landscape is undergoing a massive shake-up with the advent of mobile payments and new entrants are threatening to knock incumbents off of their perch.

FSA managing director, Martin Wheatley, added more recently that, “the reluctance of some banks to change ways of doing things, is becoming increasingly unacceptable to consumers. If banks do not provide what consumers want, the new entrants might.”

And as a recent YouGov survey showed, consumers increasingly want to use their mobile phones to make and manage payments. 29 per cent of British mobile owners are keen to use their handsets instead of cash or cards to pay for goods or services less than £20. Unsurprisingly, the figure rises amongst 18-24 year olds – the next generation of banking clientele –, with 41 per cent saying that they would prefer to use their phones for low-value transactions.

If their device had the capability, 49 per cent of smartphone owners said they’d be interested in swiping their phone to make a payment in-store, which is an increase on 12 months ago when 42 per cent said that they would like to ‘wave and pay’.

Consumers want to do more than just make payments with their mobile but actually use it like they would use a wallet. iPhone users are most inclined to use their phone as a wallet with 60 per cent saying that they would like to manage their bank account (average 42%), shop online (58% vs. average of 41%), pay for a travel ticket (46% vs. average of 30%), or pay a friend or relative (29% vs. average of 21%) using their mobile phone. This is all evidence of the growing inclination towards the ‘mobile wallet’ despite the infancy of the mobile payments market in the UK.

Some banks have made headway in providing what the consumers want, notably Barclays with the launch of several mobile payment services lately. However, with the release of the new O2 mobile wallet app in the last couple of weeks, which provides a more enhanced customer experience, banks are clearly behind the pack of leaders. Furthermore, with the likes of Facebook and PayPal hot on their heels with their far more loyal member networks, it will only be a matter of time before banks lose out or wise up and follow the FSA’s advice in the battle for payments supremacy.