How mobile technology is driving the evolution of physical cards

Enabled by high smartphone penetration, advancements in payments solutions and Smart Nation initiatives, consumers and businesses across Asia Pacific are embracing cashless payments. Going cashless also paves the way for countries to transition from physical card payments into mobile payments.

Singapore, one of the economic powerhouses in Asia, is a good example of this trend. Singapore is aiming to become a cashless and cheque-free society by 2025. According to the 2019 Global Payments Trends Report by J.P. Morgan, cards are by far the most-used method for e-commerce payments in Singapore, accounting for 68% of all transactions and $3.3 billion of sales. As the second-most popular payment method in Singapore, digital wallets are already accounting for 14% of all e-commerce perpetuated by the integration with different payments systems, which allows users to make fast and secure transactions on their smartphones.

The role of physical cards

While consumers are increasingly embracing digital and mobile payments, the vast majority continue to use physical cards due to the ease and widespread acceptance of devices that support card payments. In the near future, use of physical cards will continue but their evolution into mobile technology has certainly begun. 

How mobile technology is driving the evolution of physical cards?

Since, 2016 global smartphone penetration has increased by 40% to 3.5 billion users today (nearly half of the world’s population). Along with growing smartphone penetration, consumer adoption of mobile payments is continuing to increase due to convenience, choice and relevancy. Let’s look at some of the key factors influencing evolution of physical cards towards mobile technology –

  • Payment methods – Mobile wallets support contactless, QR code & in-app mobile payments providing all sorts of payment options to consumers without the need to carry a physical card.
  • Mobile Payment acceptance – merchants and payment service providers are expanding their capabilities to support all payment methods across all the channels i.e. in-store, mobile or online providing consumer choice to pay via their preferred payment method.  
  • Convergence of payments & loyalty – Era of lifestyle super mobile applications has begun. Examples such as Alipay, WeChat Pay and Grab are building entire digital ecosystems where consumer day-to-day needs are met through their mobile application. You can use such apps for money transfers, bill payments, buying movie tickets, food delivery, taxi booking, shopping etc. Consumers are engaged at multiple touch points – pre-sale, during sale and post-sale.

This is creating a completely new shopping experience where payment is blended into convenience, experience and rewards, something that cannot be matched by traditional payment methods. In other words, it is no longer just about physical cards or payment, but about the total consumer experience. Mobile technology has turned point of sales into point of engagement resulting in an opportunity to build relationship with your consumer & influence their shopping behavior.   

Future opportunities

Consumer experience journey through mobile technology will continue to advance & shape the future. For example –

  • Biometric authentication using fingerprints & Iris scans are already integrated into smart devices. Many governments around the world have embedded it into their national ID cards & use it for security purposes to authenticate consumer identity. It’s evolution into payments is no longer a question but it’s just a matter of time.
  • Facial recognition is an emerging technology that we have already started to experience on our smartphones as part of payment authentication. Alipay introduced “Smile to Pay” solution that allows consumers to authenticate their payments by having their faces scanned in front of the point-of-sales system.
  • Other emerging innovative solutions like Wirecard’s AI-assisted voice commerce and AI-enabled smart mirrors are further pushing the boundaries of shopping experience providing a more personalized consumer experience.

Recent Covid-19 situation is further accelerating consumer adoption and awareness of mobile technology over physical card based shopping experience. While physical cards are here to stay, mobile technology will continue to challenge its existence, as focus will shift to consumer experience rather than the payment method. 

Ultimately, brands, merchants & payment solution providers will need to leverage mobile technology to provide an integrated, digitalized experience for consumers. When incorporated into digital payments, the possibilities for consumers and retailers are endless.