Since the launch of the first iPhone 10 years ago, the payments industry has benefited as much as any as connected devices have become the central way we interact with the world. Mobile devices have proven to be the driving force to normalise new enabling technologies such as biometrics, making consumers more comfortable to pay using biometrics than passwords.
And millennials are driving many of these exciting changes.
We recently shared insights from our annual Digital Payments study, which surveyed over 42,000 people across 22 markets in Europe, to examine consumers’ changing attitudes towards payments and how they manage their money more broadly. The study showed that millennials – young adults aged 18-34 – are driving mobile commerce behaviours, whether that’s shopping, sending money to friends or family, or doing everyday activities such as paying bills.
Mobile banking has become particularly popular millennials with 69% of UK millennials regularly checking their balance or managing their money on their phones and tablets. They are also embracing other payment forms and behaviours such as peer-to-peer payments through apps (something that social media companies are beginning to introduce globally), contactless payments with Apple Pay and Android Pay and mobile shopping on-the go.
The ability to shop anywhere, at any time has resulted in e-commerce outstripping face-to-face spending in the UK in recent years. We’ve seen this through Visa’s monthly Consumer Spending Index, which has demonstrated a steady growth in household expenditure through the e-commerce channel. Since January, online spending has shown year-on-year growth in every month of this year except April.
For online retailers, removing points of friction in the shopping experience has been key. In the early days, when consumers first started to move from the desktop to smaller smartphone touchscreens, website navigation and the perils of the ‘fat finger syndrome’ led to many frustrations. This has been addressed by the mobile-optimised sites and apps offered by most major retailers now. One click payment services, coupled with browsers which remember pertinent details, negate the need to re-enter billing and delivery information. Two in five (42%) of the population have now paid for goods and services online via their mobile device – rising to 65% of 18-34 year olds. Millennials also lead the way in making face-to-face payments on mobile devices through the likes of Apple and Android Pay – half have now used these services at some point, compared to 29% of the general population.
And it doesn’t stop with traditional shopping – young adults are also the leading demographic when it comes to sending money to friends and family. Over a third (34%) of us have now done so – rising to 59% of millennials in the UK. Payment platforms like Visa Direct are now enabling customers to make direct payment in real time to companies of all sizes, offering direct access to funds. Mobile platforms also enable people to make direct payments for simple tasks such as transferring money to a friend to cover holiday costs or a share of a restaurant bill.
Customer convenience and ease underpinned by secure technologies
Even before the digital era, payment innovation has been about striking the right balance between customer convenience and security. This is what drove the uptake of debit and credit cards, followed by the introduction of chip and PIN. Convenience will only go so far; without the security underpinning it, consumers will never trust and adopt new technologies. Mobile phone manufacturers have recognised this, and the integration of fingerprint scanning technology in smartphones – and, recently, facial recognition – has been embraced as the ideal combination of security and convenience. Across all age groups, 86% feel biometrics in general are a secure form of authentication compared with 71% who trust more traditional methods such as passwords, and signatures. Fingerprint scanning is the most trusted biometric payment method – 76% of millennials agree it is secure, while over eight in 10 (81%) of over 65s feel the same way. The adoption and acceptance of frictionless, simple and secure payment innovations transcend the ages. Our research has shown that older generations are just as likely – if not more – to embrace new payment technologies.
Easy access to fingerprint scanning and facial recognition isn’t the only leap in security either. The emergence of tokenisation, which creates unique numbers for each transaction, has helped to enable NFC mobile payments such as Android Pay and Apple Pay. With an estimated 8.4 billion connected devices in use in 2017, according to Gartner, this opens up a wealth of possibilities to integrate payment in technologies in objects which would previously have been considered unsecure. Nearly three in five (57%) Brits have concerns over security and fraud when making payments on mobile devices, but encryption technologies would make the majority of this group (54%) feel more secure.
What’s in store for the future?
Looking ahead to the future, the speed of development and market penetration offered by mobile technology is likely to grow. For one, the internet of things is looking likely to realise its potential. That number of connected devices is expected to increase by over 100% in the next three years to over 20 billion. Soon enough, it is possible that we will be able to order and pay for food directly from our cars as we drive home.
Millennials will continue to drive mobile money management and payments. More than nine in ten (91%) predict that they will be using their mobile devices for financial purposes in three years’ time, far above the national average of 72%. Where it’s difficult to see where this might end up is in the balance between online spending and face-to-face in the retail sector. We’re certainly likely to see biometric technology begin to make its way into bricks and mortar retail spaces facilitated by mobile technology.
What remains key is consumer choice. Smartphones have democratised how companies innovate and placed the consumer back at the heart of the development process. People want a frictionless experience, taking the path of least resistance, just as long as they can remain secure. Our research shows that we need to consider the customer based on their individual needs, rather than deciding which technology is best for them. There are those for whom biometrics or mobile payments do not work, and they can’t be left behind as we look to develop the industry. It is up to payments companies to recognise the multitude of options for consumers to make payments across a number of platforms, and take the lead on working with partners to help provide this.
Bill Gajda, Senior Vice-President, Innovation & Strategic Partnerships at Visa
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