According to the findings of a study conducted by the Internet & American Life Project at the Pew Research Center in conjunction with the Imagining the Internet Center of Elon University, mobile payments are set to replace the daily use of money by 2020.
The report reads, in part, “people will come to trust and [to] rely on personal hardware and software for handling monetary transactions over the Internet and in stores” and “cash and credit cards will have mostly disappeared from many of the transactions that occur in advanced countries” within the next eight to ten years.
Carrying Cash Daily Is Getting Less Common
It is already true that most people eschew the daily use of cash in favor of debit or credit cards. Taking the next step to the electronic wallet is not so large a leap as some naysayers might think, given the burgeoning popularity of smartphones.
According to a Nielsen survey conducted in January 2012, some 66 percent of Americans age 24-35 own a smartphone with 48 percent of the overall population using the devices. Both numbers are trending upward. When a smartphone is used as an electronic wallet, it can deploy payment information from a “virtual” credit card via near-field communication (NFC).
This is the same kind of information currently stored on a plastic card’s magnetic strip. Traditional credit cards, however, are highly vulnerable to identity theft, whereas the chip-based cards that are currently the standard in Europe and around the world are much more secure. Using a smartphone as an electronic wallet is simply the next evolutionary step in the chip-based concept.
Minority of Respondents Cited Ongoing Security Fears
Chip-based cards have been slow to catch on in the United States and NFC-enabled smartphones may have a similar, steep acceptance curb. A third of the respondents in the Pew survey said they would not use NFC-enabled payments, citing security concerns.
The majority, however, 65 percent of those surveyed, said they believed consumers will fully adopt the use of smart devices to complete their purchases. Interestingly, that number correlates exactly with the penetration of smartphone ownership in younger adults.
In its conclusions, however, the study conceded that the adoption of the NFC technology will take at least a decade to reach the predicted levels out of concerns for privacy, the ongoing need in some transactions for anonymous payments, and the slow pace at which the necessary infrastructure will be put in place.
The latter is true if for no other reason than existing companies have a significant financial stake in the current business payment models. Changing out the needed point-of-sale equipment is, in all likelihood, the slowest of all the factors mentioned affecting widespread adoption of NFC payments over the long term.