The future of mobile payments

April 2021
Read time: 7 minutes


We spoke to the BDO payments team about how the payments space has grown, plans to further fuel the UK’s competitiveness – including tax incentives – and the safeguarding consultation that could change the way fintech is regulated.

Our experts:


Orla Reilly, Financial Services Director

A director in the financial services audit team, Orla is one of BDO’s subject-matter experts on payments. She also sits on the global fintech team representing payments.



David Britton, Tax Partner

A tax partner at BDO, David specialises in corporation tax and leads on any tax work created in relation to fintech, banking and crypto.


David Butcher, Technology and Media Partner

David is an audit partner in BDO’s technology sector team, leads the fintech team in the UK, and is part of the global fintech leadership team with respect to the crypto-sector.


The mobile payments space covers any method used to pay for something digitally, including payments made via mobile wallets over the internet with a provider such as PayPal, or via a contactless payments using a smartphone. It has been disrupting traditional methods of banking for over a decade and continues to offer unrivalled opportunities.

The mobile payments space has seen huge growth in recent years, with a third of UK eCommerce spend in 2019 being made using a digital or mobile wallet, according to Statista¹. This acceleration continued in 2020 following lockdown restrictions when people switched their purchasing to online. Although overall spending transactions declined during this time – because people weren’t going out and spending money – there was a noticeable rise in card payments and online shopping. In fact, 49% of global consumers say they shop online more now than they did before the pandemic².

The pandemic also accelerated the global decline of cash payments due to physical stores being closed, social distancing requirements and concerns around hygiene. As a result there was a marked increase in demand for contactless payment on cards, smartphones and smartwatches, with 9 out of 10 UK payments in 2020 being contactless³. This demand has resulted in a planned increase to the contactless transaction limit to £100 which will see further growth in the digital payments space.

The tech sector responded well to new opportunities brought about as a result of COVID-19 and there was a lot of growth in the challenger bank space specifically. Monzo, for example, picked up an extra £60m in funding in Q4 of 2020. During this time, the payment platforms rose to the occasion and showed that they are well-equipped to deal with such rapid changes in consumer preferences. Conversely, the traditional banks have been slower to keep up with changing demand, and it has become clearer than ever that they need to accelerate their digital transformation and adapt to the evolving landscape.

Understanding the different players in the payment space 

We have seen increasing numbers of BDO clients and financial institutions alike become more receptive to adopting fintech-style digital solutions. HSBC were one of the first to collaborate with a fintech when they worked with Bud on an app for First Direct.

As commerce and business increasingly move online, companies are looking at the overall cost-benefit analysis of going digital with their payments, if they haven’t already. These decisions around whether to introduce eWallets or start using QR codes for payments, for example, may involve engaging new suppliers.

"Fintechs tend to be favoured for their responsiveness, agility, and greater willingness to collaborate than legacy providers."

Fintechs tend to be favoured for their responsiveness, agility, and greater willingness to collaborate than legacy providers. They accept that it is important to work with others to make sure issues such as security and anti-money laundering (AML) requirements are covered off. To this end, the mobile payment providers tend to keep their core offering very niche and bundle a number of other start-up services around that. This means they can leverage specific tech functions as a way to develop their overall proposition. They have learned that in order to grow fast they have to buy in certain skills and rely on outsourced arrangements.

Payment services and eMoney institutions such as PayPal help merchants accept payments online. They tend to offer a cheaper alternative to the historic banking platforms. They are also more adaptable and overall can be a better solution for a number of companies, which serves to increase competition in the market. PSPs are proactive about adapting their system and service offerings for a wide range of clients. Many PSPs work with other fintechs that could be seen as direct competitors. When PSPs like Stripe link their systems and adapt their APIs to make things cost-effective, they know that gives them a clear competitive advantage.

Card schemes like MasterCard and Visa continue to invest in alternative payment solutions, such as mobile payments, and this investment in the payments ecosystem is helping to fuel innovation and growth in the space. MasterCard and Visa, for example, have a number of incentives and schemes running to help start-ups and PSPs look at new products, work with the government on the COVID-19 loans, and offer other levers aimed at stimulating the economy.

The big banks are conscious that the challenger banks pose a threat. They are looking at ways to deploy their capital and embrace innovation so that they are not left behind. They are realising that strong collaboration (or indeed buying) around shared goals with digitally savvy fintechs will be key in keeping their customers happy and well-serviced.

Safeguarding of client money

Payment services and eMoney institutions have seen increased scrutiny from the FCA in recent years. Safeguarding is a hot topic, particularly within the current uncertain economic environment and following recent high profile collapses. The FCA now requires firms to perform an annual independent safeguarding audit. The regulator issued a consultation paper with a deadline of the end of April 2021. The aim is to maintain adequate protections for consumers, while making sure regulatory expectations keep pace with the changing landscape. 

Find out more in our article on Independent Safeguarding Audit for Payment Services.

How mobile payments will help UK regenerate after COVID

Currently, 10% of all global fintechs are based in the UK and, of those, 17% are payment businesses. It’s clear this space has a pivotal role to play in the UK’s post-COVID regeneration. As Ron Kalifa’s in-depth 2021 review of the UK’s fintech sector puts it: “Payments is an area of high impact and rapid growth with potential for huge expansion in terms of competition, innovation and services provided to customers. The UK is in a very strong position to take a leading role in reshaping the landscape for payments regulation in order to create an environment for fintechs to develop and thrive.” 

The Kalifa report included several recommendations to help drive the UK economy, improve its competitiveness, and encourage more investment in UK fintech. Many of these recommendations, such as expanding R&D tax credits, will directly impact the mobile payments sector in a positive way, helping it become a world-leading ecosystem.

The future of mobile payments

In the immediate future we can expect to see even more sophisticated secure verification and identification tools on the market. 

Much of this development is being driven by the cryptocurrency space. Certain players are keen to create much more advanced methods than are currently possible using a mobile app on a smartphone. One key factor behind these developments is that crypto providers are conscious of the need to demonstrate that the industry is secure. 

The future of mobile payments in the UK looks set to continue to grow at a rapid rate with the benefit of increased collaboration, increased investment, research and development tax credits and robust safeguarding. It’s certainly a space to watch closely over the next 12 months.

Many UK fintechs are looking to expand into new markets across the world. Following Brexit many have moved to Lithuania and Ireland so they can expand across the EU, US, Australia and Asia. This shows the continuing growth and opportunity which the UK fintechs are trying to exploit before local providers react. Fintechs expanding should be aware of the differing regulatory, accounting, legal and tax treatment for moving into new markets – and the associated costs. Therefore it is crucial for fintechs to plan fully before embarking on new ventures.   

Do you have specific questions about mobile payments? Get in touch by emailing [email protected]


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1Mobile commerce in the United Kingdom (UK), Statista.com
2. Pandemics and presents: A look at how consumers plan to shop for the holidays in 2020, Bazaarvoice.com
3. Nine out of 10 UK card payments in 2020 were contactless. Computer Weekly
4. Budget 2021: Contactless card limit will rise to £100, BBC NEWS
5. Britain's big banks play catch up with fintech with new apps, Reuters.com



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