August 12, 2020

Mobile Wallet – what does it mean for the customer experience?

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In 1995 in a large town in the West of England a smart card electronic cash system was launched. It was called Mondex and was widely considered to be the catalyst that would cause the demise of cash. Pundits at the time claimed that within 10 years the UK; if not the World, would be a cashless society. The technology spread quickly from Swindon, to London, to Hong Kong and New York, but by 2001 all that was left of it was a rusting Mondex terminal in a car park off the M4. Cash remained safe; the trouser pockets of many a gentleman continued to jangle with the sound of loose coins.

Fast forward 20 years and cash could be on the endangered list once again. In July a smart electronic cash system was launched to wide fanfare in the UK (having already been launched in the US in October 2014) with Canada and China rumoured to be next in line. Apple Pay; the mobile wallet from Apple,  is the revolutionary new way for iPhone users to shop (well iPhone users with accounts with MBNA, American Express, Santander, NatWest, Nationwide, RBS and Ulster Bank – Barclays, Lloyds, Metro Bank, HSBC, Halifax, M&S Bank, John Lewis, TSB etc. are all expected to come online by Autumn). Already the UK has 30,000 more contactless terminals than US, as a result of the popularity of NFC (Near Field Communications) in the UK. At launch Boots, BP, Costa Coffee, Dune, JD Sports, KFC, Liberty, LIDL, Marks & Spencer, McDonalds, Nando’s, New Look, Post Office, Pret A Manger, SPAR, Starbucks, SUBWAY, Wagamama, Waitrose and Transport for London accept Apple Pay, and there are many more waiting in the wings. Visa predicts UK mobile payments will reach £1.2bn a week and be regularly used by 60% of Brits by 2020.

However, what does Apple Pay (and Samsung and Android Pay, both of which are due out soon) mean for the shopper experience? Opinion is divided. On one hand it is thought that mobile NFC payments will enhance the in-store experience, by reducing queuing times. Having NFC only channels means that like in airports with biometric passports, people can literally tap and go. It is also thought that average spend will increase as people are not confined by the amount of cash they have in their wallets. This differs from traditional card payments as consumers are preconditioned by the minimum spend associated with card transactions. Despite the fact that these largely no longer exist, learned behaviour is hard to unlearn. In the shopper psyche cash is used for payments under £5 and cards are used for larger payments. Not so with the mobile wallet, consumers will happily pick up a 30p newspaper and use their phones to pay.

So far so good. However, critics are pointing out that mobile wallets will further reduce human interaction with a brand. Often the only personal contact a person has with a retail brand is in-store at the till, take this away and many shoppers’ brand experiences that have been established through personal contact will become faceless. We are social animals and removing this layer of human interaction, however small, will erode the brand’s personality. The small corner shop mentality of the 1950s is something that large organisations, through loyalty schemes and well trained shop assistants, have been trying to replicate and yet mobile wallets take them one step further from this retail idyll.

Whether mobile wallets wipe out cash remains to be seen; more pressing will be how retailers preserve the personal brand experience in the wake of a tap and go culture.

Louisa Osmond, Teaching Fellow About Louisa Osmond, Teaching Fellow

Teaching Fellow at Edinburgh Business School. Part of the Marketing team, focusing on digital marketing.