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Digital wallets not yet ready for prime time

We read a lot about digital wallets these days – particularly in the wake of 2014’s Apple Pay announcement. All this excitement inevitably raises the question: when will digital wallets replace leather wallets? In other words, when will old fashioned cash and traditional credit cards become passé?

To answer that question, we need to consider the following:

While six out of seven billion people in the world have mobile phones, according to eMarketer, the number of smartphone users worldwide will pass two billion this year. Additionally, the percentage of worldwide Internet users is expected to reach 44.4% this year and 48.2% percent by 2018. With nearly half the world set to be online in two years’ time, this will indirectly drive this demographic to use digital payments whereas the other half won’t have the means for mobile payment.

Mobile payment is more popular among the young and middle-aged populations, but its adoption is noticeably less in rural areas versus urban areas. According to the Consumers and Mobile Financial Services 2015 report by Federal Reserve’s Board of Governors, mobile payment usage has trended upward across all age brackets from 2011 to 2014. However, usage is greater among late teenagers and adults under age 45, and is very low among those 45 years of age or older. Also, considering all age groups, the overall percentage of mobile payments among mobile users was only 22% in 2014. The report also shows that security concerns among consumers, cited by 59% of the non-users, constitutes the main impediment to mobile payment usage.


report by MasterCard Advisors indicates that 85% of global consumer transactions are still done with cash. Moreover, traditional plastic credit cards remain extremely prevalent. A recent study from Software Advice shows that nearly 80% of small- and medium-size business retailers are not EMV (Europay, Mastercard and Visa) ready, while most EMV readers are compatible with Near Field Communications (NFC) to accept mobile payments like Apply Pay and Samsung Pay. With six out of 10 U.S. credit card consumers lacking EMV-ready chip cards, according to ACI Worldwide, it becomes apparent that traditional credit cards will likely still exist for some time. When cash and traditional credit cards are still so widely used, it becomes clear that it will be a long time before the digital wallet replaces traditional modes of payment.

So, what does all this add up to? The younger generation recognizes how technology can work to replace traditional payment methods like cash, checks and credit cards. Growing up in tandem with the growth of smartphones and mobile-apps, they look forward to more payment control, flexibility, security, and simplicity. Additionally, forward thinking organizations that bring new, user-friendly payment technologies with various cashback offers, discounts and other marketing promotions can encourage customers and small businesses to move away from traditional payment methods.

However, cash remains the primary mode of settling commercial transactions on a global scale. So, while we’ll see a continuous increase in digital and mobile payments, it simply won’t be enough to replace leather wallets in the near future.

Mr. Chandra is a director, Delivery, for Westborough, Mass.-based Virtusa Corp. He can be reached at [email protected]