Is credit aversion a bump or a barrier toward mobile payment acceptance?

May 20, 2014

Through a special arrangement, what follows is a summary of an article from Retail Paradox, RSR Research’s weekly analysis on emerging issues facing retailers, presented here for discussion.

In a poll of 2,503 college students in early April by Balance Innovations, only 16 percent reported they would use mobile payments all the time if such payment methods were widely available.

Forty-two percent would use it somewhat more, depending on the retailer or purchase, and fully 28 percent would not make more mobile payments at all. Those results certainly don’t bode well for the mobile payment industry. "Somewhat" is not a ringing endorsement.

Separately, an RSR survey conducted during the holiday season asked a similar question: "In five years, how do you think you will pay for items when you shop?" Invited to check all types of payment that apply, only 22.1 percent of 190 U.S. respondents between the ages of 18-29 selected mobile payments as one of their choices. That was actually slightly less than the overall U.S. average (1,252 respondents) of 23.7 percent.

RSR partner Brian Kilcourse is fond of saying that to be adopted, a technology has to be easier to use than it is to ignore. Do mobile payment technologies meet that criterion?

In the case of Square, which enables stores to accept credit or debit-card payments through smartphones or tablets, the answer is obvious — it is way easier to use it than to ignore it, no matter how old you are. For a shopper like me, the opportunity to avoid carrying lots of cash is great. I enjoy supporting local businesses, but I rarely carry much cash. Square gives me the ability to buy on impulse wherever I might be.

Starbucks has had success with its mobile payment app which is tied to its loyalty program. Consumers like it. But as FierceRetail’s Executive Editor Laura Heller insightfully pointed out, it’s a pre-paid program and, basically, cash. She believes the hurdle around mobile payment acceptance is less about mobile versus credit/debit but rather between cash and credit, particularly with Millenials expected to drive adoption.

"[Millenials] are carrying a ton of student debt (and pissed off about it), came of age during the recession and consider credit cards bad," wrote Ms. Heller in response to a column on the subject I penned for Forbes. "They think that debit is cash. A card is swiped and then prompts cash to be deducted from a bank account like an ATM withdrawal, but the card part doesn’t register. Try to tell them it’s not the same as using paper money (as I did following the Target security breach) and you’ll get blank stares."

Is credit aversion, particularly with Millennials, a significant barrier toward greater acceptance of mobile payments? Do you see it as more of a long- or short-term challenge?

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13 Comments on "Is credit aversion a bump or a barrier toward mobile payment acceptance?"

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Debbie Hauss

I have three children with a lot of college debt and I think that really does impact how they function out in the marketplace. That said, I do think my children understand the difference between credit and debit, so I don’t think “credit aversion” is preventing them from adopting mobile payment.

I think many consumers in college and in their mid-20s are still struggling to establish themselves and mobile payment is just not a priority to research, understand and utilize. If it’s true that this generation will make less money overall than their parents, then it definitely could be a a longer-term challenge. The industry may need to approach this group in a different way to meet their specific needs.

Max Goldberg

This all seems like much ado about nothing. One study about the future of mobile payments is not indicative about Millennials acceptance or aversion to credit. Mobile payments have not been adopted because they are not easier than credit or debit cards and consumers question their security. This represents both long- and short-term challenges for the technology.

Bill Davis

Short-term challenge and not sure this is the impediment its being made out to be. Mobile payments will happen, it’s a matter of when, not if IMO.

Tom Redd

This is just a short-term burp due to the news media spending way too much time on the topic of college loans. They spew what is under review in DC and this is a political topic as well.

In a matter of time, this payment method will happen and might be one that the Millennials do not lead and get “credit” for. We had $4.5 trillion in retail sales in the USA and NA last year – that is a lot of transactions.

Mobile payment will fly – just let its wings open a bit wider.

Ralph Jacobson

If you look outside the U.S., adoption of mobile apps, payments, and lifestyle in general has been ahead of U.S. adoption for years. I do see mobile payment, especially debit rather than credit, taking a stronghold in the U.S. within the next 3-5 years. It is simply too easy to use.

Larry Negrich

I think this is all just a very short blip on the road to consumer acceptance of mobile payment technologies. We’re working on some payment initiatives focused on the college-age crowd and I’m more worried about new-to-market technologies being competitive threats than I am about student’s having an aversion to existing mobile payment types.

gordon arnold

The two concerns regarding this issue showing no end in sight is the transaction fee and internet security. To reduce or eliminate transaction fees, a few banks are offering consumers an option of maintaining minimum balances and/or no rewards. With a large number of the Millennial generation living paycheck to paycheck, this is a non option.

At a time when e-commerce and the internet are everyday use with billions of participants, security issues like we are seeing within the retail and the banking industry are inexcusable and the cause of significant slowing of industry acceptance, confidence and growth.

There is no short- or long-term reversal of these anchor problems in sight or on paper. The single largest contributing factor keeping these issues in front of growth is industry’s leadership owning little to no information technology awareness. This problem also shows no sign of relief in the form of present-day search and placement practices.

Bill Bittner
Bill Bittner
3 years 4 months ago

Since debit is as easily used as credit, I think the premise that credit is the barrier is false. I think the issue is a lack of a constantly visible bank balance.

Just like you can look into your wallet to see how much you have, the online payment industry has to come up with a way that lets people monitor the balance of their bank account. Unfortunately this gets complicated because you have to not only know balances, but also the pending payments that are going to hit from another direction. Maybe if the banks offered an account that could segregate “debit card balances” from “total balances” so that users could transfer an amount to their debit card portion just like they carry cash in their wallet, it would make things easier.

Finally, it is quite possible that the younger generation has heard too many stories of people getting ripped off online. After hearing enough stories or their own knowledge of how fragile network security really is, this generation may not be willing to take the risk.

Vahe Katros

I think poverty aversion is a quality that Millennials share and the idea of introducing changes to the use and access of money speaks to a bigger narrative that won’t be understood, sadly, until the truth is easier to grasp than it is to ignore.

This generation might also have an aversion to unconscious behaviors – perhaps qualities like mindfulness or slow consumption are in play here. But we’re not talking about my generation, so if you want to dig what people say, include an open ended question, like why?

There is something important here; go back and do some in-depths.

Lee Kent

I too do not attribute slower acceptance to mobile payment as a credit issue. If they are going to use it, it must be easy and/or give them some additional benefit. They are certainly happy to buy online, which generally requires a credit or debit card.

Maybe if you ask them to swipe their phone then have a unique pin number texted to them that they then enter? I’m betting they would really go for that! They have too few dollars to risk getting hacked. That’s my 2 cents….

Roger Saunders

Credit usage is a learned behavior. Consumers, first and foremost have to have experiences in the use of debt, which they gain by having access to credit. That usually entails a job and income streams.

The Millennial Generation, whether they are “pissed off” about student debt (that could be with parents or themselves for lack of training), or not, will come around to the usage of debt and credit. This is a short-term issue, and it’s impacted by current experiences.

Based on the March Prosper Monthly Consumer Survey, 35.5% of 18-24 year olds maintain that they do not have a Credit Card. That figure is down from March, 2010 (42.0% of 18-24 year olds dis not have a credit card).

Those 18-24 year olds who do have a credit card, are not as likely to pay their monthly bills in full (38.3%) compared to Adults 18+ (44.5%). At the same time, only 7.9% of the 18-24 year olds are only paying a minimum amount, compared to 8.3% of Adults, 18+.

Hopefully, with experience, comes wisdom. Short term challenge, and a willingness to work with the Millennial will keep them in the credit fold.

Sylvain Perrier
Sylvain Perrier
3 years 4 months ago

At this juncture, mobile payments remain a solution looking for a problem and won’t likely take-off until some form of consolidation in the industry occurs, and some of the larger brands jump-in and drive change, like Apple, Kroger, etc. We might see a shift when the MCX solution is brought online.

Lewis Olishansky
Lewis Olishansky
3 years 3 months ago

Brian Kilcourse is correct… a technology has to be easier to use than it is to ignore.

However I would add a corollary to that. It does not have to be easier, if it is more fun/interesting, or has a user payback. So adding discounts, loyalty points or a social media experience will encourage use. After that, habit and convenience will take over and the technology will take hold.

That said, I believe mobile payment adoption, in one form or the other is a very high likelihood.


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