Contactless card payments completely changed the game when they were introduced over 15 years ago.
Things started slow, but they quickly gained speed to become the preferred payment method of billions worldwide. Nowadays, you’d struggle to find somewhere that doesn’t accept contactless card payments.
But given they’ve been around for so long now, it was only a matter of time before something arrived to challenge the stranglehold contactless card payments had on the payment industry. That challenger was contactless mobile phone payments.
Technically, they use the same technology. But what we’ve seen in recent years indicates contactless phone payments could be the titan to finally topple the plastic card throne.
Here are just a few reasons why contactless phone payments are (probably) the future of contactless payments as a whole (and why you absolutely should be accepting contactless phone payments if you aren’t already).
What are contactless phone payments and how do they work?
Much like contactless card payments, contactless phone payments allow you to make in-person purchases at a contactless card machine with a simple tap of your phone, instead of your card.
Using something called NFC (Near Field Communication) technology, your smartphone can use magnetic field induction to communicate with other nearby devices (in this case card readers) to make payments.
To do this, all you need is to have your bank account connected to a digital wallet (like Google Pay or Apple Pay – more on those in a moment) and your phone will be able to act in precisely the same way as your bank card to make payments.
Why contactless phone payments will continue to build steam
Almost everyone carries a smartphone
This one might be a little obvious, but it’s nevertheless true.
As of July 2023, 86.11% of the global population owns a smartphone, according to data from Statista. And given that almost 100% of smartphones can allow for contactless payments, that means that almost 9 out of 10 people on the planet at least have the option to use this form of payment, if they’re not limited by the methods of payment accepted by the vendor.
But the convenience factor reigns supreme in this scenario – because people are almost always carrying their mobile phones and are used to removing them from their pockets or bags regularly, the action of making a payment with a smartphone doesn’t feel quite as trying or as foreign as that of removing a plastic card from a wallet or a purse.
The more steps of difficulty – even slight difficulty – you can remove in the consumer process, the more likely the consumer is to have an enjoyable and frictionless custom experience.
78% of customers value convenience over anything else when making purchases in a post-pandemic world, according to a report by e-commerce experts Linnworks. This makes contactless phone payments the clear winner when it comes to convenience.
Many vendors offer contactless as a form of payment and the numbers are rising
Along with the above, over two-thirds of retailers in the US offered customers the option to pay via contactless in 2021, according to data from financial experts Radiyant, with that number seemingly growing year on year.
This means that, as time rolls on, the option to pay via mobile phone will likely continue to grow alongside business owners who adopt contactless payment options, with the two progressing side by side as people adjust to the tech.
Phone payments statistics in the UK are a good indicator
Around 32% of adults in the UK were registered to make some form of contactless mobile payment by the end of 2020, according to data from UK Finance.
Given how quickly the technology seems to be taking hold in the population, this number will surely be higher now. But the changes in figures between years serve as a good indication of just how quickly the payment method has taken hold.
According to the same data, the number of citizens making payments contactless with their mobile phones saw a dramatic jump of 7.4 million between 2019 and 2020.
If these numbers are anything to go by, and if they’re representative of the rise of contactless mobile payments in other developed countries around the globe, it may not be a question of ‘if’ contactless mobile payments overtake plastic cards, it’s ‘when’.
Interesting contactless phone payment statistics globally
Along with the UK, the rest of the world is in the midst of a mobile contactless payment boom.
Transaction figures for contactless mobile payments will grow from 26 billion in 2021 to 49 billion in 2023 (a growth of 92%) according to a report from market analysis company Juniper Research.
Perhaps surprisingly, the area of the world that is set to experience the fastest growth in mobile contactless payments is Latin America. The same report highlights that Latin America will experience a staggering 400% growth in mobile contactless payments between 2021 and the end of 2023.
According to research author Susanna Hampton:
“Latin America has seen rapid development in its digital infrastructure in recent years, shown by the increased investment into supporting digital transformation, as well as an increasingly favourable regulatory environment. This will further drive payment digitalisation in the region.”
A focus on digital wallets
Digital wallets are what have allowed mobile contactless payments to reach the level of sophistication and notoriety they have in such a short space of time.
In short, they’re digital libraries where you can store your physical bank cards or log into online banking services aside from your traditional banks, like PayPal.
When you need to pay contactlessly with your phone, you can simply pull out your phone, bring up your digital wallet and either pay using funds stored in the wallet itself or use a bank card you’ve already pre-stored in the wallet.
The beautiful thing about digital wallets is that you can use them to store multiple cards, essentially eliminating the need to ruffle through your physical cards when you need a specific one.
And because digital wallet payments already account for 29% of the global point-of-sale transactions (according to data from FIS Global), several banks are seeming to make the shift towards offering digital wallets as well as online banking services.
In the near future, we could see various banking apps updated with digital wallet options, in an attempt to fend off the competition from other digital wallet providers and keep customers who have been mostly loyal to a singular bank for years on-side.
If the move is simplistic enough to understand and customers can access their digital wallets through their usual banking apps, expect the use of mobile payments to rise once again thanks to yet another added convenience for the consumer.
Payment security is still top-notch
Much like regular contactless card payments, mobile contactless payments enjoy a similarly impressive level of security, thanks to sharing the same technology.
Payments between contactless cards (and mobiles) and card machines are encrypted, meaning the information that’s shared at the point of sale is scrambled, making it useless to any prying eyes that may use underhanded tactics to breach the network in an attempt to steal the data.
But contactless mobile payments can go one step further. According to Barclays:
“In addition, the Contactless Mobile ‘PIN to pay’ feature, allows you to ensure a PIN is required for every Contactless Mobile transaction (except when using Contactless Mobile with TfL).”
This means you can get the best of both worlds; The convenience and speed of contactless mobile payment with the added level of security of quickly entering your pin number before making a payment.
Is there a chance phones won’t be the future of contactless?
Even though mobile contactless payments are carving out a considerable path for themselves now, there’s a chance they won’t be the most dominant form of contactless payment in the future.
We’ve seen how convenience rules as king in the payment world, so what is more convenient than pulling your phone out of your pocket?
The answer, of course, is when you don’t need to reach for anything at all and your payment option is as nearby as your wrist.
Wearable contactless payment devices like smartwatches are also picking up steam, with their popularity and sales numbers on the rise. Given just how easy it is to tap your wrist on a card reader, instead of producing your mobile phone, there’s every chance these wearable devices will be the premier contactless payment choice of the future.
Contactless isn’t going anywhere anytime soon
With contactless payments now accounting for well over 25% of all payments in the UK, according to UK Finance, as the technology showing a similar rate of trajectory around the world, it’s safe to say contactless isn’t the preferred payment method of tomorrow – it’s here and now, and it’s here to stay.
The only question is, which form of contactless payment will prove to be the most dominant?