The recent Irish launch of Google’s mobile wallet, Android Pay, has focused our attention on new transaction technologies and begged us to ask what the future of payments and money holds for brands in Ireland.
To find out, we carried out an in-depth study of this exciting area. In this first part of our ‘Future of Money’ blog series, we take a look at the drivers of the biggest disruption to money in human history.
How did we get here?
While it’s true that money and transactions have existed in multiple ways across human history, what we are seeing is an unprecedented acceleration in the transformation of our financial system.
This transformation began with the deregulation and digitisation of money from the 1980s onwards, enabling currency to criss-cross the globe in milliseconds, transforming global commerce.
We are living through the biggest disruption to money in human history.
Emerging from this, smartphones, social media and big data are propelling a new wave of disruption making it possible to transform nearly any kind of data into currency, creating radically new ways for consumers and businesses to transact, create and exchange value.
Four global trends transforming payments & banking
This transformation is being driven by four major, global trends.
We are seeing new ways to pay and transact.
It has been predicted that mobile wallet transactions across Europe will grow by 62% between now and 2021, and P2P payments in the US are poised to exceed $86 billion by 2018.
In future, it will be completely normal to use our smartphones to pay for everything through mobile wallets like Android Pay and Peer-to-peer (P2P) payment apps like Venmo or Circle, which allow people to send each other money directly, potentially replacing cash and blurring the lines between social and payment channels. With the ‘internet of things’, anything can potentially be made into a payment device. Just recently, Amazon launched Amazon Go, a concept grocery store which lets people pick up their items, leave and pay without passing a check-out.
We are seeing the emergence of virtual currencies alongside euros or dollars.
Starbucks’ successful branded mobile wallet not only lets people pay for their coffee with their smartphone, it is also linked with their MyStarbucks Rewards loyalty scheme, offering instant, personalised rewards. Branded wallets in this way become, in effect, loyalty schemes on steroids, creating, in effect, virtual currencies.
Virtual currencies can also be used as part of an advertising campaign. For example, in Mexico, Nike+ let fans use their health app data as currency to bid on exclusive Nike products, and it may become normal for people to track their overall ‘financial fitness’ through apps like Mint. To reach young adults in Denmark, McDonald’s created Coin Offers, a gamified currency which they could earn through participation in social sharing and then spend in restaurants.
We are looking at a future in which banks will still exist but not in the way we know them today.
A recent PWC survey found 83% of Irish financial services managers believe financial institutions are at serious risk. We may be looking at something like a ‘bonfire of the intermediaries’ as financial services and traditional banks are disrupted by new financial technologies as FinTech start-ups seem better able to adapt to consumers’ needs.
In turn, banks are upping their game and many, such as Bank of Ireland and Mastercard are looking at cutting edge technologies like blockchain, the system underlying Bitcoin.
Adoption of these technologies are being led by Millennials and Generation-Z
Alongside these trends, we also have the rise of two generations – Millennials and Generation-Z – who bring with them a different money mindset.
According to global research, 73% of Millennials in the US are more excited about tech brands like Google, Amazon, Apple, PayPal or Square offering financial services than their own nationwide bank, and 52% of Millennials in the UK and US have already used a mobile payment platform.
But it’s Generation-Z – our most enigmatic generation aged between 9 and 20 years old – who will bring deeper changes due to their different money mindset, especially as they come of age. This is a generation which has never known the world without smartphones and social media.
What does this mean?
These trends suggest we are moving towards a gradual integration and convergence of money with data, and media channels with payment channels and that tech adoption will accelerate as Gen-Z begins to enter the world of money and finance.
This will bring profound changes for consumer behaviour, marketers and retailers. How this rapidly changing ecosystem will evolve is hard to hard to predict but we cannot get away from the fact that this transformation is coming whether we like it or not.
But while these global trends are on the march, the question remains: what will happen in Ireland? And what will this mean for consumers and brands?
We know that local factors exert much more influence over who will adopt these technologies, and when. This is what we look at in the next part of our series on the future of money.
Read more on our Future of Money study:
If you’re interested in finding out more about our research, get in touch with the Core Strategy Team.