Mobile Payments Could Replace Cash By 2016

It's no secret that mobile payments are growing by leaps and bounds. It's not hyperbole to say that mobile payments are the future of financial transactions, especially in the consumer-to-business marketplace. Is that future happening sooner than you might think? It looks that way - if a new report from Forrester Research and PayPal has it nailed.

Change is Coming Sooner Than You Think

First, know that mobile payments are already widely viewed as being "mainstream." A July 2011 study from KPMG notes that 72% of business executives say that such payments, on a large scale, are inevitable. Another 58% say that their companies already have a mobile payment system in place.

"We believe that exploding smartphone growth and a myriad of opportunities will grow mobile payments at a much faster rate than our respondents anticipate," said Gary Matuszak, KPMG global chair of the Technology, Communication and Entertainment practice, in a statement. "A wide variety of payments is ready for adoption, as several key players already provide or are rolling out mobile payments, and interest among consumers in utilising mobile payments is growing, in line with the industry's readiness to deploy them."

That could be happening faster than even the most optimistic mobile payment advocate could have hoped. Recent data from the U.K. arm of Forrester Research, in partnership with PayPal, estimates that mobile payments will replace other forms of payment by 2016.

No Wallet? Use Your Smartphone Instead!

A PayPal article, entitled No Wallet Required, examined the British mobile payment marketplace and concluded that "digital money" will become the go-to payment method within the next four years.

"We'll see a huge change over the next few years in the way we shop and pay for things," says Carl Scheible, Managing Director of PayPal U.K. "By 2016, you'll be able to leave your wallet at home and use your mobile as the 21st century digital wallet. Our vision of money is to enable you to pay for something from wherever you are, whatever device you're on – a PC, mobile phone, tablet, games console [sic] and a whole lot more."

Scheible adds that paper currency won't go away entirely, but will face a diminishing demand. "The lines between the online world and high street will soon disappear altogether," he says. "Children born today will become the first 'cashless generation.' It will be completely natural for them to pay by mobile."

PayPal should know. It already processed about A$3.6 billion in mobile payments in the U.K. in 2011 alone – that's five times the amount that the online payment giant saw in 2010.

Australians Love Their Smartphones

Australia has the second highest rate of smartphone penetration in the world, only Singaporeans use the device more than us. A staggering 28 per cent of visits to banking sites in this country are now made through a mobile device reports The Australian Financial Review. This is up from just 2 per cent in 2009.

Locally, mobile has rapidly become the most important battleground for retail and banking institutions as they look to defend their payment turf from a host of emerging competitors, including technology and social start ups.

The Bottom Line

The British report concludes that the trend to mobile payments is only growing stronger with each passing year. About 50% of all mobile or smartphone device users bought something via mobile payments in the three months leading up to the publishing date of the study.

That number will grow, the data shows, and will cement mobile payments as the payment of choice for consumers not just in the U.K. but also here in Australia.