Survey of Global Market Today for Mobile Wallets and Mobile Money - In aftermath of Apple Pay launch

Yeah the old joke still holds true: to see what will be in the next iPhone, just look at a 4 year old Nokia flagship smartphone. And so it goes with NFC and with mobile wallets. So yes, lets do an update about where mobile money, mobile payments and mobile money stands today, as the tech world is suddenly mesmerized by the latest iMagic called NFC.

Do you think NFC was amazing in the new iPhone 6 series smartphones now, and the Apple Watch? Sure, why not. Except that Nokia had NFC on its flagship five years ago. And like just about everything in this industry, that NFC too was first done on a mobile phone... in Japan. 10 years ago. Oh, you then argue that no Tomi, you don’t understand Apple, its the ecosystem and the mobile wallet. Fine, Apple launches Apple Pay, its mobile wallet in the USA in 2014, a country with established banking, credit card and ePayment industry. And some of those players are included as Apple partners (some banks, some credit card companies) but not all, such as Paypal was not part of the partners. What about Nokia? It launched Nokia Money not in the advanced nations of the Industrialized World where we don’t desperately need yet another payment mechanism. No, Nokia launched Nokia Money first in India - the world’s second largest nation by population, the third largest handset market, and the world’s largest country if measured by the size of how much of its population is unbanked. Nokia Money was not designed to run on NFC at the time, it ran of course on SMS, still today the most used form of mobile payments that works on all phones, not just smartphones. Nokia Money partnered of course with some local India banks and grew rapidly in India achieving 13% market share.

(Then Nokia’s new CEO, Stephen Elop, killed the Nokia Money project and decided to abandon Nokia’s announced commitment that all its smartphones would have NFC - this because his beloved Windows Phone could not support NFC even as Nokia’s supposedly ‘obsolete’ Symbian of course could. Elop made a total of 33 strategic blunders in the disasterous 35 months he was in charge at Nokia. Can you imagine if Steve Jobs was running and he could have reported that look, we have NFC and we have mobile wallets which Apple will only do years from now - gosh Steve Jobs would never have killed those amazingly forward-looking leadership positions Nokia held. In fact no sane CEO would have destroyed Nokia's leadership positions. I discuss several of Elop's biggest strategic mistakes in this blog: Worst CEO ever).

So yeah. Now that Apple decided finally to give us NFC and mobile wallets, suddenly the US based tech press is very eager to talk about mobile money. Paypal is in the news as it is going to be spun into its own company. Starbucks reports that 14% of its US revenues come from loyal customers who have installed the Starbucks mobile wallet (using the payment mechanism of QR codes). Square just announced that it has added SMS functionality so that Square users in the USA can now send money also to those mobile phone owners who haven’t installed the Square app. And almost anyone who digs even modestly into mobile payments, finds the astonishing stats from Kenya, around their seven mobile payments systems led by M-Pesa (which runs on SMS and USSD). So whats the story in balamory? Lets ask the guy who wrote the world’s first book on mobile money and payments. Wait, that would be me (Pearls Vol 3: Mobile Money).

44 MILLION NFC MOBILE WALLET USERS IN JAPAN

So yeah. I do love talking about the simple technologies that work everywhere, especially SMS, but lets leave M-Pesa and others for later in this blog. The excitement now is Apple Money running on NFC on iPhone 6 models. How radical and clever is this technology? Does it have legs, can it become big. Well. Lets see.

Japan’s largest carrier/operator NTT DoCoMo introduced FeliCa branded Osaifu Keitai (mobile phone wallet) running on NFC literally ten years ago, in 2004. As always with new payment systems early on its a bit of a chicken-and-egg problem, not enough users and not enough payment devices and not enough point-of-sales terminals. But its been steady growth and today there are over 500,000 retail points where you can use FeliCa (or its plastic card based cousin, Suica, similar to Octopus, Oyster etc NFC payment plastic rechargable cards). So yeah, every Seven-Eleven, every McDonald’s, every petrol station, every train ticket machine, etc accepts FeliCa in Japan. The vast majority of handsets sold in Japan have had NFC chips on them, and the active user base has kept growing. The latest numbers I’ve seen are 36 million Osaifu Keitai users on NTT DoCoMo, 5 million more users on rival KDDI network’s Osaifu Keitai Au and yet another 4 million more on the third network, Softbank’s Osaifu Keitai. All use the same FeliCa compatible NFC technology so any retail cash machine has only to be upgraded once and all three network mobile wallets will be supported.

So Japan has 45 million active users of NFC based mobile wallets. They have of course major Japanese banks involved and major international credit cards like Mastercard. Japan is the 10th most populous nation at 126 million people. As a percentage of adults (who have essentially 100% mobile phone ownership) 44% are active users of NFC based mobile wallets today. Note, Japan obviously is an industrialized nation that had widely used reliable banking and credit card systems in place when FeliCa Osaifu Keitai was launched in 2004. If you want to project this to the USA, it would suggest roughly 104 million US adults once the same level of NFC phone penetration rate and a single nationally compatible mobile wallet standard was deployed (and most daily retail outlets also be upgraded to this one standardized NFC payment system).

Incidentially Japan is by no means the only NFC mobile wallet success story. In neighboring South Korea, the largest operator/carrier SK Telecom has 12 million active users of its Syrup mobile wallet. Rival carriers/operators have their own, KT’s Moca wallet for example has 2 million users. The total stats are very similar to Japan, about 41% of South Korean adults are NFC mobile wallet users (and essentially all consumer retail points of sale accept NFC payments). In fact South Korea was the first country where the credit card industry stopped issuing plastic cards as standard components of credit service, now Visa, Mastercard etc ask consumers do they want the free plastic card mailed to their home address. The credit card is always automatically enabled onto the mobile wallet by default.

 

NFC based mobile wallets also exist in Taiwan, Singapore etc and are being rolled out now in China. China’s national payments provider UnionPay just launched an NFC based system with Samsung smartphones as the launch devices. We don’t have a lot of reporting on the value of the payments transactions but SK Telecom of South Korea reports that the annual payments processed on Syrup are just shy of 1 Billion US dollars in value. In very rough terms we could estimate that about 60 million active NFC mobile wallets are in use in Asia and their annual transaction volume is likely in the scale of 5 Billion dollars. The vast majority of purchases are of relatively low value, from train tickets and soft drinks at vending machines to convenience store purchases, fast food restaurants and petrol station fill-ups. Berg Insight reported last year that NFC based mobile wallets existed in 13 countries around the world. And once a mobile wallet is deployed, multiple branded cards can be installed upon that wallet from credit cards to bank debit cards to loyalty cards. SK Telecom reports that its 12 million Syrup mobile wallet customers hold a total of 45 million separate cards on those accounts, so the average Syrup user has activated 3.75 virtual cards on the mobile wallet.

So yeah. Cool. So far I’ve been focusing on NFC based mobile wallets but there are plenty more mobile wallets on other technologies. How many globally? Grand View Research counted 230 million mobile wallet accounts globally which procesed 611 Billion dollars worth of payments last year. But as Gartner reported, only 2% of global mobile payment transactions are currently on NFC based systems, we should of course examine the other 98% of mobile payments while we talk about mobile money. And there is plenty more to mobile payments than just mobile wallets. Now how do we transfer money if not NTC? Those methods are primarily SMS, USSD, mobile web, QR Code, and mobile app. SMS and USSD work on all phones, mobile web (like using Paypal on your mobile phone) works on most phones which now have a browser. QR codes and apps only on smartphones and mostly require an app to be first installed onto that smartphone.

SMS IS THE KING OF MOBILE PAYMENTS

So yeah, lets move to the giant. SMS. SMS text messaging is actively used by over 6 billion mobile phone users (or in reality, used at mobile phone subscriptions/accounts as one human may have several accounts/SIM cards and use SMS on both/all of those). As we just heard from Ericsson’s CEO, the planet now in September has 7.6 Billion mobile subscriptions in use. SMS active user base is 79% of all mobile accounts. And before you say ‘Whatsapp and Facebook and the youth’ yeah yeah yeah. A brand new study out last week, of 7,000 youth surveyed by Niche in America, found that 87% use SMS. The reports of SMS’s death are vastly premature. So yeah, sending an SMS is not making a payment, but making a payment by SMS is essentially as easy as sending an SMS. Which is why it becomes so widely used.

So a bit of history. The world’s first SMS based payment system was launched in Finland by Coca Cola in 1998 when they enabled two Coke vending machines to accept SMS payment. The telecoms tech was ‘premium SMS’ and you sent an SMS to the number printed on the Coke vending machine. Seconds later you heard the ‘clunk-clunk’ in the machine and a fresh cold Coke can dropped out of the bottom of the machine. Next month on your phone bill you’d discover a new line item ‘Coca Cola purchase’ and the price was the same as paying cash. Who wouldn’t love this? Coca Cola has rolled out SMS payments in most countries where it operates and reports that when SMS payments are enabled the same vending machine typically produces 14% more sales!

So how is Finland today? BookIt reported last year that 3.7 million Finns use mobile payments. Thats 86% of Finland’s adult population. The most common uses are various vending machines, public transport and fast food, as well as for paying all sorts of online and virtual goods and services. Finland of course has all the main forms of mobile payments but SMS continues as the most popular. One great example is Finnair, which invented the mobile phone based check-in 13 years ago (also, initially, via SMS but now available on anything from apps to mobile web to of course still also, SMS). That service has evolved and expanded. Today Finnair offers automated paid - but discounted - upgrades whenever any flight has any business class seats unsold. The discounted seat offer goes first to Finnair’s platinum-level frequent fliers on that flight, then to the gold members, etc. More than half of Finnair’s passengers use mobile check-in services. 23% of Finnair frequent fliers who have received an offer like that have already purchased such a discounted upgrade! They can pay by frequent flier miles or by mobile payment. Instantly on one click. The convenience is remarkable, especially comparing to attempting to enter 16 digit credit card info on a touch-screen keyboard in a hurry at an airport while juggling luggage. And if you know anything about airline economics, the business class seats are where profits are made. The combination of a loyalty program, mobile wallet, and personalized, timed special offer can yield astonishingly strong results in profit (and inventory management, all fully automated, no humans involved).

And that loyalty card and mobile payment bundling is a powerful combination that is only starting to be understood. Starbucks and Uber got together in London on a magnificent offer. If you buy a Starbucks coffee on your Starbucks mobile account, the coffee shop will toss in a free Uber ride from your location to the nearest Starbucks. How cool is that? And how brilliant in cross-marketing and support, where obviously both brands want to cross-pollenate their loyalty card customer bases, with no risk of cannibalizing each others’ businesses but rather where they truly are complementary.

AH AFRICA

So then lets see how fast this can explode if all the elements are just perfect. Lets now go to Kenya. M-Pesa was launched in 2007 by Safaricom the Vodafone affiliate and Kenya’s largest mobile operator/carrier. An instant success it soon led the world’s mobile payment statistics and its creators won the Economist Innovation Award in 2010. Today Kenya has 7 mobile payments solutions, all primarily working on SMS and USSD with M-Pesa still the biggest. The nation of has 26 million active mobile payment accounts according to the Central Bank of Kenya. If we just assign the number as percent of adult population (over age 18) it would be 97% of adults. In reality of course some have multiple mobile payment accounts, especially any solo merchants or entrepreneurs, and especially in an African nation where 39% of the population is under the age of 18, many teens also work and will have mobile payment accounts. But on an oranges-to-oranges comparison to the Japanese, Korean and Finnish stats, yes, when measured total mobile payment accounts as percent of total adult population, Kenya will pass 100% penetration rate this year. And for those who worry about the survival of the traditional banking industry yes, the number of mobile payments accounts exceeds ‘real’ bank accounts in Kenya by more than double.

Thats not the big number no. The mobile payments revenue volume is the staggering number. Kenya’s GDP is 44 Billion US dollars in 2013. And how much was the value of payments that was processed through mobile? Central Bank of Kenya reported that it was 22.4 Billion dollars last year. Yes, Kenya’s economy has now passed the half point, where yes, more than half of the economic value of the nation’s output transits mobile phone accounts. 51% in just six years (and rising). And just before you think this is a total anomaly and it can’t possibly replicate, many African countries follow in close lock-step. The next in line, Zimbabwe is already at 43%. Mahindra Comviva just reported at the Mobile Web Africa conference three weeks ago in Johannesburg, that 10 African countries have passed the level of 25% of the population already using mobile payments. And in Africa this will inevitably be SMS and USSD based systems. But seriously, yes, salaries paid by mobile, taxes paid by mobile, school fees, mortgages, car payments paid by mobile.

Worldwide KPMG just counted that 80 countries have already launched mobile money services. The oldest full mobile wallet (running on SMS) is from the Philippines. Smart Money launched in 2000 and few months later rival GCash also launched. Today Philipines have more than 10 million mobile money wallets on the two rival platforms. One of my fave stories comes from Rio de Janeiro in Brazil, where local ice cream merchants have for many years now accepted SMS based mobile payments because the cool people hanging around at the beach will not bring their wallet, but will of course not go anywhere without their mobile phones. So if you want an ice cream now its no problem.

 

And still, back to the Philippines, one of the many overwhelming advantages of mobile as a payment system over all others is how versatile it is. Take ATMs/cash machines. The Philippines has 10,000 cash machines/ATMs where you can draw cash if you have a bank account or credit card. But the Philippines has over 1 million top-up merchants to do your mobile account top-ups. They all can act as ‘cash out’ points, ie human ATMs/cash machines. Yes 100 times more places where you can pull out cash from the mobile account, than if you have the plastic of a debit card from a bank or a credit card. And the same is true of course of merchants themselves. You don’t need any expensive cash machine or credit card reading machine. All you need is some old second-hand worn Nokia basic dumbphone and it can act as the receiving end of any mobile payment for the merchant. Brilliant!

KILLING CASH

So then lets examine the pending death of cash. Coins were invented in what is now Turkey, three thousand years ago. But we will live to see the end of coins as a minted payment instrument in most countries. The race is on. But hold on, let me explain how this started. Lets go to Estonia. About six years ago Estonia saw wide use of criminal scam related to parking. A man dressed in what appeared to be official police uniform was standing at a parking meter. The parking meter itself had an official-looking sign saying it was broken. The policeman took your cash, issued you an official-looking receipt and you went away confident the parking was legal. When you returned the parking meter ‘broken’ sign was no longer there, your car was ticketed and when you complained to the judge, you found out that the ‘receipt’ was a fake and obviously nobody could find that ‘police officer’ either. Clever scam. It depended on cash payment of course.

So as Estonia had been using mobile payments with parking since 2000 and all Estonians had mobile phones by then, the government decided to end that crime with a simple law. No cash was accepted anymore to pay for parking. The parking meters were changed and now you could pay by credit card or e-cash or of course, the most popular way to pay - SMS. The crime wave vanished.

Then in 2009 Sweden saw a sudden spike in crime where bus drivers were held up by gun-point or knife-point and robbed of the spare cash they had intended for use as change when passengers paid for tickets when boarding the bus. The total value robbed was always modest but the threat to the drivers was considerable. So Sweden had to consider how to safeguard the drivers. Should they install USA-style bullet-proof glass cabins for the drivers or why not just adopt what Estonia had done. As Sweden had used mobile payments since 1999 and all Swedes had mobile phones and many other electronic payment systems also were very popular, they just copied Estonia and outlawed cash as payment in busses. That crime vanished overnight.

 

So we’ve already seen actual (small) industries eliminate cash as accepted payment mechanisms while allowing mobile payments to replace it. So then fast-forward to the race to kill cash. Visa has already said that their view is that mobile is the future of payments (not plastic). But how close is that cashless society? The Dutch retailers association is lobbying the EU to allow Dutch retailers to stop accepting Euro in cash denominations. The Swedish health lobby (led by members of the pop band Abba) is asking for Sweden to outlaw cash because of the filth that accumulates onto cash. But Turkey went the furthest so far. Their parliament established in 2011 a target date for the Turkish Lira cash production to end. How far into the distant future is that date? Year 2025. Yes. We may be only 11 years from the beginning of the end of cash. It would be poetic justice if that was Turkey as the first coins came from Turkey 3,000 years ago.

Now its a race, will Kenya do it first or Zimbabwe or Somaliland or will it be Turkey or Estonia or Finland or South Korea or the Philippines or Sweden or Netherlands or Japan. I can promise you it won’t be the USA, they are so sooooo far behind in this race. Americans still use cheques in consumer payments haha (seriously!)

So yes, nice that even Apple finally ‘gets it’ about mobile money. Nice that they have created their mobile wallet but a proprietary version built on top of industry-standard NFC system so once again, Apple isn’t standard and now a merchant has to opt for Apple Pay only? Come on, even in America that is foolish. Its like selecting Betamax after VHS has already established an unbeatable lead. But rest of the world will definitely utterly ignore Apple’s selfish proprietary NFC mobile wallet and go for standardized payments systems instead. Why can’t Apple for once do a standardized solution right out of the box?

Will mobile money be big. You betcha! Will it eventually kill cash and plastic. Of course it will. But in Industrialized nations where we have many reliable and widely used payments alternatives, the path to mobile money will be slow. In the Emerging World where alternatives are few, costly and far inbetween, mobile money is growing at breakneck speeds. But yes, mobile money is inevitable and one day we all will receive salaries, pay rents and taxes on our mobile phones and yes, we will use them like we use plastic and cash today. The current dominance of SMS and USSD will eventually subside. QR codes are a good short-term solution but NFC the inevitable long-term most suitable solution, which can process payments very fast to suit rush-hour subway train type of uses (like they do in Japan today).

So thats the update on mobile money. If you’d like to see one of my presentations on ‘Imagine Perfect Money’ it is here. And if you’d like to see my ebook about mobile money Pearls Vol 3: Mobile Money is here.  

Comments

[virgil]

Tomi, you make some valid points, but you forget something important: it doesn't matter that mobile money is exploding in Africa, since Africa is not even close to being a suitable market for iPhones.
So yes, adoption of mobile money is faster in Emerging World; but adoption of iPhone-level priced smartphones is not.
Apple can't play the "Africa" card.

So what do they do? Naturally, they focus on the industrialized world. And primarily, on the USofA. It would be foolish for them not to.

You raise an interesting point: it's unlikely that Japan or Sourth Korea, with established mobile payments solutions, will rush to adopt Apple Pay. But will it catch on in the US? Maybe! Yes, it would be a pain from a compatibility standpoint - but I remind you that the largest american network is on CDMA, and it's much more inconvenient today to be unable to use your mobile when you travel abroad than it is to be unable to make mobile NFC payments.
So yes. Long term, Apple Pay is very likely to be dead technology. But in the long run, we are all likely to be dead :). Short-medium term? It may still see significant success in the US. I think it's 50/50 at this point (or at least 25/75) - anyway, it's premature to declare it a 'fail".

[AppleTurfer]

If Apple Pay succeeds in the US, that would be enough. NFC payments have not taken off here. Apple didn't just through an NFC chip in its phones...they got the 3 market making CC companies, and a good number of national retailers on board with a complete working ecosystem (there's that "E-Word") again. Europe has had "Chip and Ping" for their credit cards for some time, but in the US we are still on mag stripe.

Apple is adding biometric security and ease of use. The reduced fraud alone is why the CC companies are paying Apple 5 cents out of $100 (or something like that) when processing payments via Apple Pay.

SMS does not have biometric security.

Google Wallet has gone nowhere in the US. Paypal lost out big time by teaming up with Samsung making Apple drop them from consideration to be part of Apple Pay rollout.

You don't have an iPhone...so you might not yet understand the advance that having a fast, reliable fingerprint identity verification on your phone is. Apple proved the technology last year with limited use cases (unlocking your phone, paying for Apps). The unlocking the phone with my thumb instead of typing in a complicated (corporate control/mandated) password was a godsend. You know how many times a day you unlock your phone?

Now with iOS8, the TouchId has been opened up for 3rd party apps and soon Apple Pay. I can now open my 1Password app with the touch of a thumb instead of typing in a password. Of course, over time, on the phone even that will be unneeded as I'll open every password protected app just as easily.

For payments, it's not merely possession of your phone with NFC that is at play. It's the biometric verification of identity. You can steal my phone, but you can't use your thumb to validate payments with it.

Now yes, with enough effort you can spoof the fingerprint reader. FAR easier to compromise the mag stripe credit card that you hand to a waiter who walks away with your card.

[schultzter]

Wow! Awesome article!!!

I've used NFC payments in Canada, and the biggest issue was lack of NFC terminals. Most merchants have no incentive to install or activate NFC terminals. Even my bank that was promoting their wallet app for NFC payment didn't bother to install NFC in their ATMs or at their branches!!!

[virgil]

@AppleTurfer - The fingerprint scanner provides minimal extra security, it does not even compare with a 4-digit PIN.
You need to understand that 2-factor means "something you have" + "something you know".
That mag stripe is not "something you know", it plays the role of the phone (i.e. "something you have"). In the entire civilized world (minus USA), that stripe is insufficient to make any purchase, if you don't also know a PIN. Yes, via 3-DS you can make sure that the plastic alone is not enough for anyone to use your card, even online (well, I guess some merchants may still decide to accept it, but it is exclusively at their own risk).

Now, contrast the PIN with the fingerprint: the finger is still "something you have", if I have your phone I might as well have your fingerprint. E.g. if a TSA agent wants access to all of your credentials, if he has your phone he can definitely get your fingerprint, but he may have trouble forcing you to 'remember' a PIN.
If someone is stealing your phone, and really wants access to all your data, now all he/she has to do is spoof your fingerprint. Hard, yes, but far easier than finding your 1password master key, don't you think?

[Vikram]

"...So yes, nice that even Apple finally ‘gets it’ about mobile money. Nice that they have created their mobile wallet but a proprietary version built on top of industry-standard NFC system so once again, Apple isn’t standard and now a merchant has to opt for Apple Pay only?..."

Actually that is not true Tomi...merchants don't have to opt for Apple pay only.

"...But rest of the world will definitely utterly ignore Apple’s selfish proprietary NFC mobile wallet and go for standardized payments systems instead. Why can’t Apple for once do a standardized solution right out of the box?..."

Because no one else has a fingerprint and biometric tech like Apple. TouchID is far ahead of anything that others have (Samsung's scanner is slow, buggy and doesn't work very well). So, other companies need to catch up.

[AppleTurfer]

Virgil - a 4 digit pin is not nearly as secure as a finger biometric. There is more too the Apple solution involving one time use tokens and other highly secure cryptographic measures. Not for nothing are the CC's giving Apple even this tiny piece of their transaction revenue.

Quibbling over that isn't germain, though. Tomi is right that this will initially be a US centric offering. It is not going to catch the world by storm or become the "new money for the third world".

Google has had a solution in the American market for some time and it just hasn't gotten traction. Apple has the kind of clout that comes from it's desirable customer base that can make markets.

[KPOM]

It's not that Apple "finally" "gets it" with respect to mobile payments. Tomi doesn't understand just how antiquated our payment systems are in the US. Heck, we still write checks every once in a while, and are just now getting chips in our credit cards! Google tried to launch NFC payments in the US. So did AT&T, Verizon, and Sprint (through the unfortunately named Isis Mobile Wallet). There's a huge retail lobby in the US that resisted change since it had no incentive to do so (they had no liability for fraud until this year). So what Apple did was play smart follower (not necessarily fast follower). They saw what worked and what didn't work. There's no guarantee it will succeed in the US, since Wal-Mart isn't signed on, but they did manage to get a lot of merchants signed up. Plus, the addition of TouchID adds a security element that may help it get traction in light of all the recent security breaches hitting banks and merchants.

[RottenApple]

@Baron95:

"I also disagree that this will be US-only for long. I think it will spread relatively fast for the countries with good (10%+) iPhone penetration."

We'll see. The major problem I see here is that, should it catch on, there MUST be a general solution. Nobody - especially politicians - would want to see a company like Apple gain control of the payment market. And nobody would want to see an outcome with 3, 4 or 5 incompatible solutions. That sounds like a total nightmare.

Also, 10% is far too low a figure. Say 20% and I may agree - unless Apple subsidizes the entire operation. And honestly, THAT I don't see happening.

If you ask me, what Apple did was a good first step but their compulsive need to create a proprietary solution depending on Apple hardware will make it very specific to a few isolated markets with very specific issues in their current payment system - that also happen to be some of Apple's strongholds.

[AppleTurfer]

@RottenApple - nothing I've heard says this is an Apple only solution. Apple is providing end point end user ease of use, but the machines themselves (not the phone) can work with chip and pin credit cards. Right now there is no standard in the US and several companies (including Visa, Google, others) have tried and failed to get traction before.

Apple is just extra incentive for retailers to support the new "card" reader devices. Anything to attract those most likely to spend money. The new devices the stores buy will be very unlikely to only support Apple Pay.

This is not Apple trying to own payments. Just another "why it's so nice to have an iPhone" feature and a few hundred million or a couple billion a year in transaction revenue.

[mark]

This article is a good starting point to discuss cash and the modern world.

In the US, their is a pushback against going to a cashless society. Some of the reason are ... old timers who fear new technology; the desire for private transactions such as, yes drugs and black market type goods, but also 2nd hand items bought and sold locally through classifieds; and finally the culture's disdain for those who don't use cash. Their was a time when you were thought less of when using a credit card to pay for items in the express lane (10 items or less). Some comedian's routines included rants about those who don't carry enough cash to buy a pack of gum.

Media (games, movies, books) is to blame as well by showing depictions of brief cases full of bills, fat wads of cash in money clips and helicopters dumping money onto city street. America doesn't want to give up cash.

Getting people to move from debit cards to smartphone payments doesn't appear to be the issue in the US. Getting rid of cash in the first place is the larger hurdle. Which brings me to my prediction ...

Cash won't ever 100% go away. As long as someone believes it has value, it will exist and be used as such. See Bitcoin for an example. I want to say Bitcoin is 'virtual nothing' but that's not true. Its CPU cycles if nothing else which kinda represents a unit of energy. The people who accept Bitcoin don't know that or care. Its simply believed in as value.

Where cash will exist is in the lower and working classes as its own inter-currency. Starting directly with the food industry and tips. People will pay for their food/meal with electronic currency (FOR THE MAN) but then pay with cash as a gratuity (FOR THE WORKER BEE). Clarification, poor people will tip in cash. The rich won't touch it. It will be the under-money shared and distributed among a circle of those who consider themselves poor. The government could even stop supporting it (accepting it as payment for taxes, bills, fines), but as long as people continue to accept it, cash will have a life of its own.

[mark]

Another quick example. Portland, OR food carts are cash only. Shouldn't wireless payments be dominating these types of transactions? Not on the West Coast it seems. There's an ATM machine located at each outdoor food court location, even though they could use a phone with a square reader as a cash register.

[notzed]

How is e-money "perfect" for the average punter?

It means somebody with no real relationship to the transaction:

1) knows all the details.
2) collects a rent on every transaction.

A very very anti-public idea and only one that benefits the rent collectors in the long run.

[adi purbakala]

@baron

Vienam & indonesia has more cc fraud used to.
Now vietnam & indonesia use chip on cc. Fraud gone.
USA no need apple. USA need chip on cc.

@virgil
Wrong sample. CDMA is DEAD everywhere.
HK CDMA dead
Korea CDMA dead
Australia CDMA dead
Indonesia CDMA almost dead
USA CDMA almost dead

[RottenApple]

@mark:

"In the US, their is a pushback against going to a cashless society."

Not only in the US. The same sentiments exist in many other countries as well - and it's not just old people feeling that way. A major issue is that a lot of people fear how technology develops and how everything is getting abused by secret services like the NSA to monitor everything they can. So, if all money transactions get transferred to the internet there will inevitably be a revolt in a society that is wary of surveillance.

"Cash won't ever 100% go away. As long as someone believes it has value, it will exist and be used as such."

I can understand, of course, that business owners want to get rid of cash. For businesses cash is a security risk, handling of cash probably costs a lot more than making cash-free transactions and of course cash is dirty.
Let's also not forget that over 90% of payments people do is already cash-free in most countries. I never see my salary as physical cash, I don't pay my insurances or my monthly bills in cash, when I go shopping in the supermarket, I normally use a plastic card to pay, and so on. I'd use it more if more places would accept it, but there's some restrictions (e.g. €10 and above) and some smaller places simply won't accept cash-free payment. I believe, though, that many of these issues will be solved over the coming years and the use of cash will reduce dramativally.
But will all this eliminate the need for physical currency?
Of course not!
What some people seem to forget is that paying in stores is not the only area where money is needed, there's always some fringe cases where such a system simply cannot work, no matter how advanced technology becomes.

"The government could even stop supporting it (accepting it as payment for taxes, bills, fines), but as long as people continue to accept it, cash will have a life of its own."

... and without cash they'd switch to something else that's being deemed of value. I've been thinking a bit about the Turkey-thing Tomi mentioned - and my personal prediction after the abolishment of physical items representing the local currency is that people will just switch to other currencies that are guaranteed to have value for the foreseeable future - most likely the US Dollar and Euro. Especially if a government's goal in abolishing cash is to control the black market - which seems to be the case here - rest assured that the black market will find its own way of doing things.

[Winter]

@Baron95
As in mobile, the USA lags a decade or so in payment technology.

CC fraud is so big in the USA because they are virtually the only ones stuck on using them.CC payments are a stopgap. I hardly use cash and use CC only when I have business within the USA.

[Jonas Lind]

Even though cash is a primitive payment system I think it is very important with backup systems for something this important. To have just one payment system in society makes it unacceptably vulnerable. We need several independent payment systems.

We must also remember that cash is the only truly anonymous way of payment. This is incredibly important as a means of reducing the power of the surveillance state. If all payments in society are logged we will immediately get an Orwellian nightmare where the authorities can trace your every move.

All over the world, the quality of democracy is undermined and deteriorating. A country can still nominally be a democracy but use its security-surveillance apparatus to track down activists who try to raise funds for protests against for example fracking, GMO-crops, separatist political parties or investigate corruption in government. If people can’t donate cash to these causes they expose themselves to government harassments, being fired if they are employed by the government, etc.

This argument in favour of cash (or similar untraceable payment methods) is not a luddite objection but have been put forward by the techno-utopian Pirate Parties and Assange/Snowden. Personally I try to use cash as much as possible for this reason. Keeping cash alive is a very important civil liberties issue.

[Tester]

@Jonas Lind:

Well said words.

The last time this came up I already voiced my doubts and all the NSA-related horror news only confirm my view.

Transferring all payment to the internet is an act of insanity, plain and simple. Especially if you don't have some form of backup in case if system failure. Abolishing physical cash would remove that safety net from the picture, creating a system vulnerability of such enormous proportions that's completely unimaginable.

Any nation trying to do without physical money could be crippled by external forces easily. Their enemies just have to make sure the internet breaks down and everything stops working. How anyone can even propose such a thing (and hail it as progress) is beyond my comprehension.

I also think it says a lot that a country like Turkey with very questionable democratic structures is the first trying to abolish cash. It tells us a lot about how their political leaders tick and it's quite clear that this is not being done to do the population a favor but to exert another means of government control.

This is a clear case that not everything that's technologically possible should be implemented. I'm also certain that awareness for such issues is rising. It is something that didn't get much exposure in recent years but I think that's going to change.

[Lars]

Thx Tomi..

Indeed.. took longer for rest of world to wake-up on NFC than I expected. Funny thing, predictable enough, is how much of the focus is related to $$. The tap & go of 1's and 0's enables far more compelling use cases, as we have long seen here in Japan, kinda like how the camera-phone evolved.. 8-)

As always = interesting times ahead.. !_!

[Spawn]

@virgil

> Now, contrast the PIN with the fingerprint: the finger is still "something you have"

More worse its the very first thing you leave and spread everywhere you go.

On top: you leave your fingerprint also ... direct on your touch smartphone. As if fraud isn't made easy enough, you can also change the fingerprint once the phone is unlocked. Now we better not ask for iOS (aka jailbreak made easy) and iCloud (aka nude promi selfis, ups) like-security to remote-rob. We also better switch to silent mode like about the uncertain fraud/lose/hack liability situation.

[AppleTurfer]

I work in mobile identity and will just say "you folks don't know what you are talking about" and leave it at that. Visa, MC, Amex and Discover are giving Apple a part (small part) of their transaction fees without charging the customer or the vendor. That alone lets you know that these people are putting faith in Apple's solution reducing fraud.

BTW, Apple is only augmenting, simplifying the user experience. The CC business still belongs to the banks and CC companies. Apple is not putting out their own standard or disintermediating the CC companies.

Apple customers will get ease of use and one more reason to pay the premium for their iPhone. Retailers will be that much more attractive to the most lucrative customer base. CC companies get reduced fraud. There is enough business in the US with just those facets to make this worth doing for Apple and to get the partners on board.

Android will also see a nice boost. Apple will drive adoption and Android will mop up with a it's much larger customer base. Again, speaking of the US where magnetic credit cards are still used.

Places that are using SMS money, already have chip and pin, are do not have credit based economies will carry on as if Apple Pay was never released.

Even in the US it will take time to roll this out. Consumers don't care about the fraud of magnetic strip because they don't pay for it (well, we all pay in higher interest rates and transaction fees). A mag stripe credit card is easy enough and familiar so consumers have little incentive. Retailers resist this change because they are the ones having to pay to change out or add to their CC terminals to support chip and pin. CC are the ones most interested in driving this change. To this end, they have set a date past which they will refuse to pay the fraud charges on mag strip transactions. Thus Apple has come out with their solution at a well timed inflection point where retailers already have to pay to change their equipment.