The Future of Money in a Mobile Age
What is your wallet? Mobile devices represent the future of money.
Tech experts say payment with mobile devices and cloud storage of financial information could be commonplace by 2020—although a number of potential hurdles and holdouts stand in the way
Within the next decade, smart-device swiping will have gained mainstream acceptance as a method of payment and could largely replace cash and credit cards for most online and in-store purchases by smartphone and tablet owners, according to a new survey of technology experts and stakeholders.
Many of the people surveyed by Elon University’s Imagining the Internet Center and the Pew Research Center’s Internet & American Life Project said that the security, convenience and other benefits of “mobile wallet” systems will lead to widespread adoption of these technologies for everyday purchases by 2020. Others—including some who are generally positive about the future of mobile payments—expect this process to unfold relatively slowly due to a combination of privacy fears, a desire for anonymous payments, demographic inertia, a lack of infrastructure to support widespread adoption, and resistance from those with a financial stake in the existing payment structure.
These findings come from an opt-in, online survey of a diverse but non-random sample of 1,021 technology stakeholders and critics. They were asked to choose one of two provided scenarios and explain their choice.
65% agreed with the statement:
“By 2020, most people will have embraced and fully adopted the use of smart-device swiping for purchases they make, nearly eliminating the need for cash or credit cards. People will come to trust and rely on personal hardware and software for handling monetary transactions over the Internet and in stores. Cash and credit cards will have mostly disappeared from many of the transactions that occur in advanced countries .”
33% agreed with the opposite statement, which posited:
“People will not trust the use of near-field communications devices and there will not be major conversion of money to an all-digital-all-the-time format. By 2020, payments through the use of mobile devices will not have gained a lot of traction as a method for transactions. The security implications raise too many concerns among consumers about the safety of their money. And people are resistant to letting technology companies learn even more about their personal purchasing habits. Cash and credit cards will still be the dominant method of carrying out transactions in advanced countries.”
While 65% of the survey respondents agreed with the statement that smart-device swiping will predominate by 2020, relatively few who chose that view expect other forms of payment (such as cash or credit cards) to disappear entirely. Similarly, a number of participants argued that mobile devices and cloud storage represent the future of money, but that this evolution is likely to be ongoing—rather than fully completed—by the year 2020.
Those who chose the optimistic scenario pointed out that mobile payments are already commonplace in many parts of the world today, and that money has already been largely digitized in the modern economy. Mobile payments build on this ongoing digitization, but with an additional layer of security and convenience for users. Indeed, a number of experts argued that mobile payments do more than simply replace existing payment mechanisms—they offer consumers new ways to monitor and gain value from their purchasing habits, and even open up the potential for entirely new forms of currency.
“For many of these experts, ‘mobile money’ represents more than just existing processes adapted to a new, more portable form factor,” said Janna Anderson, director of Elon’s Imagining the Internet Center and a co-author of the study. “They see this as an opportunity to implement security measures that are lacking in our current financial systems, to offer consumers more control over their spending, and to even reinvent the way we think about the concept of ‘money’. Top people from Microsoft, Nokia and Netflix were among the many who said it is up to those who control transaction systems to set the timetable for adoption”
Although most of the experts surveyed expect mobile payments to play a prominent role by the year 2020, many envision mobile wallets supplementing—rather than fully replacing—more traditional forms of payment. Some expect this change to evolve along generational or socio-economic lines, with younger and more well-off consumers flocking to the convenience of mobile payments while others stick with tried-and-true methods. Others predict that privacy or security concerns (i.e., a fear of storing all of one’s sensitive information digitally in the cloud where it can be stolen or used for marketing purposes) as well as a desire for anonymity when making sensitive purchases will ensure that cash maintains a foothold in the consumer economy for the foreseeable future. And still others predict that the financial services industry will delay any wholesale migration from their lucrative business in debit and credit card transactions.
“Due to concerns about the technology, resistance by incumbent providers and the generally slow nature of societal change, there is a fairly consistent feeling among these experts that mobile payments will exist on a spectrum along with a number of other financial options,” said Aaron Smith, a Senior Research Specialist at the Pew Internet Project and a co-author of the study. “Indeed, some expect these services to most quickly reach widespread adoption in the developing world, due to its lack of an incumbent banking sector and ingrained consumer habits.”
This is third report generated out of the results of a Web-based survey that gathered opinions on eight Internet issues from a select group of experts and the highly engaged Internet public. (Details can be found here: http://www.elon.edu/e-web/predictions/expertsurveys/)
Following is a selection of respondents’ remarks:
“There is nothing more imaginary than a monetary system…Of course we’ll move to even more abstract representations of value. Other countries are already content to use their phones; we’ll catch up eventually.” –Susan Crawford, professor at Harvard’s Kennedy School of Government
“The 2020 date might be a bit optimistic, but I’m sure that this will happen. What is in your wallet now? Identification, payment, and personal items. All this will easily fit in your mobile device and will inevitably do so.” –Hal Varian, chief economist at Google
“The introduction of cryptographic protection to the instruments such as credit cards that we carry around with us is necessary and inevitable.” –Peter J. McCann, senior staff engineer for Futurewei Technologies
“I for one welcome my beast-marked future financial transactions. Just look into my eye–biometrically of course—and add to my e-wallet,” –Paul Jones, associate professor at the University of North Carolina-Chapel Hill
“We have already witnessed the transition from cash to debit/credit cards. The electronic wallet is not much more than a ‘virtual card,’ in which near-field wireless communication replaces the reading of a magnetic stripe.” –Christian Huitema, Microsoft distinguished engineer
“I see ‘credit cards’ as already virtualized, electronic currency. The form factor and functionality of the card doesn’t really matter: I’m already making an electronic transaction and I expect all the affordances of such.” –Peter Pinch, director of technology at WGBH
“I expect this transition to happen even more quickly that by 2020. These systems are already the norm in other countries such as Japan.” –Suzanne England, professor of social work at New York University
“The driver here will virtually 100% be whether or not the credit card industry decides it can make more money through changing technologies.” –Jonathan Grudin, principal researcher at Microsoft:
“I don’t think it will be security concerns that will stall the adoption of NFC so much as the effort involved with getting the infrastructure for its use in place on a national scale in the United States.” –Steve Jones, professor of communication at the University of Illinois-Chicago
“Cash—tangible, hold it in your hand dollars—has been around for millennia. It won’t go away in a decade.” –Jeff Eisenach, principal at Navigant Economics LLC
“The majority of working class and lower-middle class people in advanced countries will not be passionate about the issue in either way but will still be extremely slow to adopt any of these systems. In many of the communities that I visit, using ATMs is still a radical thing done by the young.” –danah boyd, Microsoft Research leader
“There will be a need for people to have an ‘anonymous’ wallet that can be used for payments that are not traced to them personally.” –Bruce Nordman, research scientist at Lawrence Berkeley National Laboratory
“When credit cards arrived, checks did not disappear, and neither did money. Although in some places either cash or cards are accepted, there are three main methods of payment. If another method of payment is added, we will likely have four methods of payment and retailers and businesses must accept another form of payment.” –Amber Case, CEO of Geoloqi
“Not only will our notion of currency change as it becomes electronic and (even more) virtual, but I see the possibility for new currencies measuring new value. We could, for example, award and trade in points for responsible environmental behavior. I also see the possibility to create new currencies that cut across national borders, independent of governments.” –Jeff Jarvis, author of What Would Google Do?
Respondents were allowed to keep their remarks anonymous if they chose to do so. Following are predictive statements selected from the hundreds of anonymous comments from survey participants:
“What cash? Already, myself and peers in the NYC area rarely use cash. We write less than five paper checks per year. Virtually everything we spend is done electronically.”
“This is a tough one, but it seems that convenience and a guarantee of privacy and security is enough for most people. We went from holding our own money, to trusting banks, to trusting credit card companies—an even more convenient way to spend will be welcomed.”
“It won’t happen this quickly less because of security fears but more because of the cost of mass adoption of these technologies. It needs to reach a tipping point where most vendors run this way, and I just think it will be cost prohibitive for a while.”
“This shift shall also take longer than expected. Other than security and privacy issues, more prosaic problems such as costs or other hindrances—e.g. if you run out of batteries, you temporarily run out of money—may arise.”
“We’ll get there, but in 2030 rather than 2020. It just takes time for the whole system—from hardware to habit—to shift. Look at how long checkbooks have hung around, and nobody has ever really liked them.”
“Mobile money is coming; it is just coming slowly in developed countries (like the United States) where there are so many entrenched options to do payments and banking.”
“As much as I’d like to see a money-free world, I’m afraid the opportunities for the hackers and pirates are too great. I’m happy to buy my $2 Starbucks using my Android but I don’t know that we will ever feel secure enough to make much larger purchases that way.”
“Much like the personal check, cash, and credit cards will take much more time to be fully eliminated. The elderly and lower income groups will take more time to adopt these new technologies, making it critical for businesses and services to maintain the cash/credit card option.”
“Simply as a demographic matter, people used to using paper money and credit cards will not abandon them within the next decade. Cultural changes don’t happen as quickly as forecasted in many of these scenarios. Changes in values, practices, and social institutions occur gradually over generations.”
“I don’t think everyone is going to go fully with smart devices. I’ve had my credit card number stolen three times in my life—all from online purchases at different, yet credible, online vendors. I do not trust everything going through the Internet. I am sure that for people that have had their identity stolen, they would want to use cash more than credit cards.”
“NFC will be ‘embraced’ for ‘small’ transactions. I suspect large transactions, such as purchases of home or cars, will be much more traditional, but that people will rapidly adopt NFC and its successors for coffee, fast food, and other ‘small’ transactions.”
“Cash survived checks and credit cards and I think it will also survive NFC payments. It’s also unlikely that credit cards, per se, will disappear any time soon if for no other reason than many NFC payments will still be made using these very accounts. What is, perhaps, more likely, is that NFC will begin to displace credit card swipes among younger individuals for those sales made in person.”
“There will always be the need for some cash in the economy—not everybody wants his or her transactions and earnings to be fully traceable. But I think that the people comfortable with using credit cards will be comfortable using smart-devices for the same things.”
“Like media, new forms do not ‘eliminate’ old forms, but they may overshadow them. Metal coins still exist; paper money still exists; paper checks still exist; credit cards still exist; debit cards still exist. All existing forms will play some role, with new forms (with privacy and security concerns) playing their biggest role in transactions that are a) small (coffee, parking spaces, magazines) and b) not seen as all that revealing. Transactions that are large (house purchase, car purchase, appliance purchase) or deemed sensitive (medical, disfavored—tobacco, alcohol, sexual materials) will rely more on more well-known forms.”
The Imagining the Internet Center (http://www.imaginingtheInternet.org) is an initiative of Elon University’s School of Communications. The center’s research holds a mirror to humanity’s use of communications technologies, informs policy development, exposes potential futures and provides a historic record.
The Pew Research Center’s Internet & American Life Project (http://www.pewInternet.org) is a nonprofit, non-partisan “fact tank” that provides information on the issues, attitudes and trends shaping America and the world. It produces reports exploring the impact of the Internet on families, communities, work and home, daily life, education, health care and civic and political life.