O2 becomes latest company to launch a digital wallet

Hot on the heels of Barclay’s Pingit and Barclaycard’s Paytag, O2 has become the latest company in the UK to offer a digital wallet.

The product allows a number of functions, including:

·         Money Message – enabling  daily transfers of between £1 and £500 to any UK mobile phone number

·         Shopping via your mobile – A  barcode and search engine function compares the prices of millions of branded goods from more than 100 online retailers

·         Your phone as your wallet – O2 Wallet enables consumers to digitise their existing debit and credit cards making paying for goods or services via their mobile a reality. Customers can load money into their O2 Wallet account via one of their debit cards, by receiving a Money Message or with cash at more than 30,000 locations including O2 stores, PayPoint and epay retail outlets. O2 Wallet’s ‘transaction history’ will allow consumers to keep on top of their expenditure with text alerts when the account balance changes; a 30-day payment history on the app; and a 12-month history online

·         O2 Money Account Card – O2 Wallet offers both a physical and a virtual O2 Money Account Card. Both are based on a Visa prepaid account. Consumers can also apply for the physical O2 Money Visa Account Card, a contactless card  to pay for things on the high street or withdraw cash from ATMs available for use at more than 100,000 contactless payment points across the UK

James Le Brocq, Managing Director at O2 Money, said O2 believes that the new product “will transform the way people manage their finances and spend money.”

But in reality, how long will this “transformation” take ? And who is the demographic it will appeal to the most? How long before it trickles down to the late adopters?   

Additional functionality will soon enable consumers to use O2 Wallet to top-up mobile airtime, and buy train tickets.

O2 Wallet is compatible with the majority of smartphones as well as iPads. Even those without a smartphone can use various features of O2 Wallet – for example Money Messages – providing they have web browsing capability on their handsets.

It will be interesting to see the take up of the O2 Wallet. The proportion of people using mobile banking increased from 9.7% in 2010 to 20.4% in 2011. It is predicted that shopping on mobile devices is set to increase by 53% in the next 12 months hitting £4.5bn and making Brits the biggest mobile shoppers in Europe.

How long before digital wallets and mobile payments trickle down to the late adopters ?

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Cash will all but die out by 2032

Clive Kahn, chief executive of CardSave, a POS terminal provider to SMEs, believes that cash will account for less than 10% of transactions by 2032.

A new generation of consumers who are regular users of credit and debit cards could mean the end of the road for cash as we increasingly prefer to flex our plastic.

Kahn’s statement comes at a time when CardSave  has seen business double in the past five years, as a significant number of SMEs accept card payments.

Statistics from the UK Cards Association show that between 2008 and 2011, the number of UK card transactions increased by over 25%.

According to a YouGov survey commissioned by CardSave, 74% of the public carries less than £30 in their wallet, while 93% carry a credit or debit card.

The survey found that 57% of people believe that cash will become extinct in the future – 50% predicting  that it will happen by 2035 and 36% by 2025.

In addition, it also found that 40% of consumers believe that being able to pay for everything by card would make their lives easier.

CardSave has seen an increase in small businesses and sole traders - such as electricians - taking card payments to help boost customer numbers and end the hassle of cash-handling.

Devices such as Barclays Pingit mobile payments service is a recent  innovation that could also contribute to boosting the cashless society. It allows individuals and sole traders to send and receive money by mobile for free - and enticingly you don’t have to be a Barclays customer to sign up.

It is expected that more payment companies and banks will follow Barclays' initiative and launch competing systems.

The CardSave report also states that  30% of people say that they have found themselves inconvenienced in the past year by retailers that do not accept card payments, with as many as 16% of people walking out of a shop without making their intended purchase because the retailer didn’t accept cards.

Kahn believes that is one of the reasons retailers are leaning to accepting card payments.

He said: ‘In today's difficult times shopkeepers need to do all that they can to boost their business, which often drives them to accept cards.

‘Taking cards has a positive impact on the business as customers’ spending power is no longer limited to the amount of cash they have in their pocket.’

According to CardSave figures, the biggest growth areas in terms of merchants taking card payments have come from hairdressers, fast food restaurants, car servicing, pubs and taxis.

According to Khan, the main factors driving the demise of cash are generational differences and the increase of technology.

He says that the under 30 tend to carry and use much less cash than older generations, over time as the younger age group makes up a higher proportion of transactions, cash usage will decline.

He believes that the introduction of payment methods that are quicker and easier to use than cash will have the biggest impact on its demise  - and the impact will be felt most within the next five years, when the ability to make electronic payments from smartphones will be prevalent.

Do you think we will be completely cashless in our lifetime?? I can't even bring myself to perform internet banking.... watch this space...........

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