1) Contactless uses (needs) the same terminal technology as Apply Pay & Android Pay. So all three are in the same boat, and benefit from the expansion of the others.
2) Just speculating, but Contactless will probably move towards a PIN or something of that nature. The whole payment industry is moving towards 2-factor. Contactless by itself is not 2-factor.
I used to be skeptical of contactless cards because of the lack of 2-factor. I thought it would be a liability (if my wallet gets stolen, now the thief can use my cards). However, the UK banks are quite vocal about promising to repay you if this happens. I've never had to put this to the test, luckily.
Also, there is still an element of 2-factor auth. Occasionally, contactless will ask for a PIN confirmation (perhaps random, or perhaps if the bank thinks the payment seems odd). A new card of mine refused to work until I had made at least one PIN payment with it, for instance.
Finally, there are low contactless payment limits - £30 right now. But these have been steadily rising as banks become more confident with their fraud systems. So, it seems that the payment industry is happy with the system.
Why is the extra thing you have to bring with you and probably use a PIN for "just as useful"? Mobile based systems are also interesting because you can just as easily use them for app based sales. Anything to reduce the friction of someone giving you money is going to be a welcome thing for retailers.
As for app based sales, they exist today just fine with credit cards.
I actually think that banks in the future will stop issuing physical cards altogether and will rely on virtual cards linked with Apple Pay, Android Pay or some other contactless based system.
I think the apple watch is considered 2-factor, where you've already cleared the first factor by unlocking the watch with your passcode (or linked phone unlock)?