Are UK Mobile Payments Primed For Liftoff?

By Chanel Smith, EMEA Editor (@PYMNTS_EMEA)

British consumers were introduced to mobile payments a few years ago, but has the payment technology already reached its tipping point in the country?

Mobile payments invaded the UK market some time ago, and the majority of consumers are aware of the nature of its services. Using a mobile phone to make a payment has yet to become ubiquitous throughout the country, however financial groups are convinced the payment method has already reached its tipping point. New research from VocaLink indicates that the UK market is ripe for a mass adoption, but there are still a few wrinkles in the mobile payments system that need ironing out. 

Those in business frequently refer to what is called, “the tipping point.” The tipping point is defined as the turning point at which a growing product, service, act or even paradigm gains mass attention and market stability. Do UK mobile payments fall under this category?

Consumer Behavior

The research aimed to better understand consumer behavior and attitude in the UK market. 

Research indicates there are various consumer trends that are helping to shape mobile payment adoption, such as growing mobile penetration. Smartphone sales are increasing consistently, with a 12 percent annual growth rate. Around 60 percent of Brits own a smartphone, with 80 percent of users between the ages of 16 and 24. One-in-four of respondents who have a smartphone said they have downloaded banking and financial applications and use them quite often to check balances, transfer money and more.

Still, the study stated that mobile phones are not predominantly used as payment devices in the UK. Most consumers reach for plastic when making a purchase, but a study from the Office of Fair Trade claims that this trend would soon change. 

OFT relied on Britain’s history to build its case, presenting the growth of online banking and contactless payments in London. Mobile banking launched in the UK in 2008 and by 2012, 17 percent of high street bank customers were using it. 

The Oyster Card, which recently celebrated its 10th birthday, is a digital payment tool that is found in 80 percent of Londoner’s wallets. Additionally, the Oyster Card program and has done well to encourage other contactless payment schemes. OFT’s observation of such case studies are pushing payments groups to look to the mobile payments models, and ask: will this form of payment share the same success across Britain?

VocaLink researchers confirm that UK’s payment ecosystem is well prepared to make mobile payments part of the norm.

Trust Builds A Foundation

At present, the study showed that 27 percent of the respondents use mobile phones to bank and 20 percent use mobiles for payments. However, currently in the UK there is not one mobile payment service that is leading the market. The mobile payments industry is still struggling with various technological setbacks. The industry has yet to introduce a uniform mobile payments system that can be applied across all businesses scenarios, such as bill payments, paying taxis or paying suppliers.

The report also highlights the importance of user confidence. Thirty-three percent of respondents said they have high trust for their bank, and 35 percent said they were more likely to make mobile payments if a bank provided services. Interestingly, 46 respondents also said they would trust UK supermarkets to become mobile payment providers. Research indicates that because mobile payments are still growing, consumers need incentives to convince them to use mPayments. Since there is a foundation of trust between banks and British consumers, it may be beneficial for banks and mobile network operators to join forces for mobile payments schemes.

The Perks Of Cash

Vocalink acknowledges that cash is still the leading form of payment in the UK and notes this is largely due to the notion that cash transactions are real-time transactions that do not inflict further risk after the payment is complete. Security is also a huge concern among consumers considering making mobile payments. The research revealed that the majority of consumers said their greatest fear was losing their mobile phone and leaving financial information stores on apps available to strangers who come across the phone. This issue must be addressed if mobile payments are to become mainstream and Vocalink reports that mobile payment providers need to simulate cash-like features. Consumers would feel safer if the needed to share bank information with vendors was no longer necessary. 

Reaching The Tipping Point

The market research shows that there is a huge gap in the payments market that calls for convenient payment solutions. Additionally, current statistics and growing smartphone adoption indicate that UK consumers are interested in mobile payments. All of these variables combined validate that the timing is right for digital payment alternatives in Britain. However, to push mobile payments past the coveted tipping point, a collaborative effort from banks, MNOs, retailers and stakeholders will be needed to implement a ubiquitous solution. 

To read the full report at Vocalink click here. 

Or to view the study’s inforgraphic with more details look below