Are We on the Verge of a Mobile Payments Revolution?

Does anyone remember when purchases could only be paid for with cash or a physical credit card? Some probably don’t, and those who do probably feel it’s been an eternity ago. Well, the truth is that today’s popular mobile payments are also quite a few years old. In fact, the first mobile payment is considered to have been made via SMS at a Coca-Cola soft drink machine in Helsinki. Since then, this formula has continued to grow thanks to innovation.

Perhaps it has been the development of NFC (Near Field Communication) technology that has given the greatest boost to contactless payments, with the mobile phone as the main exponent.

This technology allows short-range communication between two wireless devices in a convenient and fast way and is behind the fact that many people have replaced their traditional wallet with their mobile phone.

Contactless, fast and simple

‘The world of contactless payments has undergone a huge evolution in recent years. What started with the simple gesture of paying with a card without the need to insert it into a terminal has advanced to a much wider ecosystem, where devices such as mobile phones, smart watches and other wearables now allow payments to be made quickly and securely,’ explains Jesús Molina, Head of Partners at Dojo in Spain.

The spokesperson for Dojo, a provider of payment tools and technology, also points out that the pandemic also accelerated this change, ‘as contactless payments reduce the need for physical interaction and were perceived as safer from a healthcare perspective’.

And while we cannot say that the customer is always right, it is true that choosing how to pay is one of their main demands today, and so the Adyen Index: Retail 2024 report states that 54% of consumers say they will abandon a purchase if they cannot pay the way they want to.

A preference that, as we said, has a protagonist: the mobile phone, a method chosen by 25 percent of consumers according to the Adyen report.

The Mastercard Retail Barometer 2023 puts us in the same scenario and states that 50% of Spaniards paid with their mobile phone in 2023 compared to 29.7% who did so in 2022.

A figure that if we analyse in depth shows us how the new generations are the ones who use this method the most: 76.4% of those surveyed considered Generation Z (under 29 years old) paid with their mobile in 2023, while only 34.4% of Baby Boomers (between 55 and 74 years old) used their mobile for their payments.

Young people, drivers of change

The same picture emerges if we take into account the data from VISA’s 3rd Study of Mobile Payment Trends in Spain, which indicates that in 2023, 42% of Spaniards used their mobile phone to make payments and that among young people aged 18 to 29, the mobile phone is the preferred method for 91%. According to Mastercard, the mobile phone is the preferred device for making purchases for 53% of Spaniards, but it is not alone in this scenario. It is followed by other devices such as the computer, preferred by 42% or the tablet, chosen by 5% and, for some years now, by other devices such as smartwatches, which are already used by 1 in 4 consumers according to Mastercard data and, the newcomers, smart rings, which are slowly beginning to conquer their own space.

But what is behind this growing importance of mobile payment? As we said, technological innovation, but above all, and in line with the VISA report, speed, simplicity, cost control and security.

These are the main advantages highlighted by users of this payment method and also explain how it is gradually gaining ground over more traditional methods.

‘More and more people are choosing mobile or contactless payment because it offers the right combination of speed and security. As we approach 2025, consumers today are looking for fast and frictionless payment experiences, and mobile payment perfectly meets these expectations. There is no need to carry cash, which reduces the risk of loss or theft, and contactless transactions are often faster. In addition, these payment methods integrate advanced layers of security, such as biometric authentication and tokenisation, which increases consumer confidence by protecting sensitive information. Through Adyen, we see how this adoption is driven by both consumer demand and merchants looking to offer a more efficient and personalised experience,’ said Blanca Ferrero, Global Head of Open Banking & Settlement at Adyen.

But are mobile payments really secure? For Dojo’s Jesús Molina, there is no doubt: yes, ‘NFC payments are extremely secure. They use various protection measures, such as data encryption and tokenisation systems, where sensitive customer data is not transmitted directly, but is replaced by a token that acts as a ‘substitute’ for the real information.

Security is key

In addition, in many cases, these payments are supported by biometric authentication, such as the use of fingerprints or facial recognition, which adds an additional layer of security. While there will always be potential threats, the reality is that NFC payments are designed to minimise the risk of fraud. It’s also worth noting that the technology continues to improve, so security measures are constantly advancing to meet any new challenges.

Two years ago, Rikki, the smart payment ring developed in Barcelona, was born under the umbrella of NFC technology and as a real example of how innovation continues to evolve contactless payment.

Created by entrepreneurs Elena Yorda and Elena Fuenmayor, Rikki is a payment ring or, as its creators define it: ‘a small jewel that houses a universal banking chip for payments’.

Battery-free, discreet and secure, which is the most important thing in the end. Thus, they assure us, ‘It is more secure than a bank card, as it never reveals your details! The ring uses NFC technology to connect to dataphones, although this technology is only one form of communication, as can be Bluetooth, Wi-Fi, 5G, etc. The important thing is not that it has an NFC chip, but that it contains a banking security chip certified by Visa and MasterCard, which is specially designed to be able to manage the payment token of bank cards, and that Rikki has the agreements and technology that allow the ring to function and be accepted worldwide. The token that is engraved on the ring is an encrypted identifier of the bank card and the ring. This token is provided by Visa or Mastercard (depending on the user’s card). Thanks to the agreements with these companies, Rikki is able to offer this service which substantially improves the security of face-to-face payments’.

The smart payment ring

In addition, all expenses made with the ring are automatically sent to the user’s mobile phone and he or she can always have a record of the expenses made. Similarly, as required by banking legislation, the ring requires a PIN for payments of 50 euros or more and, in addition, with the Rikki application the user can change the card, pause payments with the ring if they are not going to use it for a while or even cancel it if it has been lost or stolen.

‘The evolution in devices reflects a clear trend: we are looking for more and more convenience and simplicity. We are moving from using the card to the mobile phone, and then to the watch, because it is about making payment as agile as possible. The next step, such as rings and other wearables, follows this same logic of making payment ‘invisible’. Beyond the fact that advances in NFC technology have enabled these devices to make payments, what really makes the difference is that consumers want payment experiences that integrate with their daily routines. Thanks to these devices, unnecessary steps are eliminated: there is no longer any need to take out a wallet or mobile phone and payment is made in a simple gesture. To this we must add the personalisation and fashion factor that these wearables include, which also drives their adoption’, points out Jesús Molina from Dojo, something that clearly explains the sense and reason for the appearance of Rikki.

It is precisely this ‘invisibility’ of Rikki when it comes to payment that, for Elena Yorda and Elena Fuenmayor, makes it the perfect option. ‘Technology has been taking up too much space in our minds and in our daily lives. That dependence on the mobile phone and the ‘mental noise’ it generates deprives us of enjoying our thoughts, the people we love and the environment in which we live. The Rikki ring is silent, does not distract you, does not need a battery and allows you to pay with a simple gesture. Unlike a mobile phone, it is not connected to the network and is not exposed to potential identity theft that can empty all your cards.

And although the question is not easy to answer, it is a necessary one: where are we heading, what will we see (use) next when it comes to paying?

The future is shaped by trust

Dojo ventures to predict a future ‘marked by the integration of more advanced technologies, especially biometrics. Although we already see the use of fingerprints and facial recognition in mobile payments, this trend will continue to grow. There is still some scepticism about technologies such as eyebrow recognition and QR payments in some regions, but all indications are that they will adapt as consumers gain confidence in them.

The key is to offer increasingly personalised options tailored to users’ preferences. At the same time, the payment experience will become increasingly ‘invisible’. It is not just that you pay quickly, but that you do so almost unnoticed, without interruptions or glitches. This seamlessness will be achieved by greater integration between checkout systems, terminals and payment technologies, removing any friction in the process. The challenge for technology companies is to make the payment experience as simple and convenient as possible, which will be critical to customer loyalty in the future.

The future of payments

Along the same lines, Blanca Ferrero of Adyen points out that ‘if we think about the imminent future, it is possible that wearable and contactless payment technologies will continue to evolve rapidly, driven by the search for greater integration in everyday life’.

He also notes that the general market trend is ‘towards even more convenient devices, such as smart clothing or vehicles with integrated payment systems’.

The iris of our eyes, our thumb, our face… How we will pay in ten years’ time is still an unknown that has surely been the focus of an episode of Black Mirror and that we can glimpse with this interesting “experiment” by VISA in Chalk Coffee, a small coffee shop in Chester (UK). Blink, take a step or contribute to a charitable cause, how do you choose to pay?