What will it take for consumers to take out their mobile wallets?
MarketingCharts staff
Through a special arrangement, presented here for discussion is a summary of articles from MarketingCharts, which provides up-to-the-minute data and research to marketers
Most adults in the U.S. believe that mobile wallets will replace physical ones by 2025, per new research from Synchrony Financial, but data from InfoScout indicates that adoption of mobile wallets remains quite modest. So, what could drive more use of mobile wallets?
In surveying 1,000 U.S. smartphone owners, Vibes discovered the biggest driver to trying mobile wallets is getting better promotions or offers. Not much has changed as a 2015 survey from comScore on behalf of UPS found finding and redeeming coupons to be the main mobile wallet driver.
But mobile wallets are about more than just deals. Coming in a close second in the Vibes survey are the organizational benefits provided. In other words, many would be willing to try out a mobile wallet if it would make their life easier by organizing things such as offers/coupons, loyalty cards and airline boarding passes. The survey separately found strong interest (69 percent) in saving loyalty cards to a phone.
The survey also found personalization is even more important than in previous years. Eighty-seven percent indicated they would save personalized mobile wallet content compared to 66 percent in the “2017 Mobile Consumer Report.”
Meanwhile, other benefits — such as enhancing experiences with favorite brands, receiving important informational updates and getting personalized offers — aren’t quite as strong in terms of motivating mobile wallet usage.
There is one key detractor above all else, though: security concerns. Fully 59 percent of respondents said that security concerns are a barrier to using a mobile wallet. This ranked far ahead of other hindrances, including the lack of the payment option at frequented stores (19 percent) and a lack of knowledge about how to access mobile wallets (12 percent).
Research has shown that the most common way of purchasing items or services via a mobile phone is by typing credit or debit card details into a mobile website. Trust may have had a role in that result. When asked which processing method they trusted the most when using a credit or debit card, almost twice as many mobile users pointed to typing details into mobile websites as did storing the details in an app.
- 2018 US Mobile Consumer Report – Vibes
- The 2018 Synchrony Digital Study uncovers the evolving landscape of digital shopping and payments. – Synchrony
- Mobile Wallet Adoption – PYMNTS
- US Smartphone Users’ Interest in Mobile Wallet Activities – MarketingCharts
- How Are Mobile Owners Making Purchases Using Their Devices? – MarketingCharts
Discussion Questions
DISCUSSION QUESTIONS: Do you see incentives, organization or personalization working best to drive mobile wallet usage? What steps might help reduce security concerns?
Poll
BrainTrust
Lee Kent
Principal, Your Retail Authority, LLC
Liz Crawford
VP Planning, TPN Retail
When customers “really oughta wanna but don’t,” there are usually good reasons why. At the top of the list for the customer is perceived value. There has to be more than “loyalty points” to cause a behavioral shift. Given all of the identity theft episodes, customers are understandably reluctant. Until customers see value beyond transaction payment they will be reluctant to store their critical information in a mobile app. The operative words here are: seamless, convenient, SAFE.
I have Apple Pay and I have all my credit and debit cards loaded into it. However, I hardly ever use it. One of the reasons why is because it is just as simple and easy to pull out a card, swipe it and pay. For me, there is no real benefit to using mobile payment.
In Starbucks, however, I always pay via the mobile app which I regularly have to top-up. Why? Because I can collect Starbucks points. They give me an incentive to pay via mobile.
There’s a lesson in there for any company wanting to push mobile payment systems.
Neil, I question “…simple and easy to pull out a card…” It is actually harder and the authorization process takes three to five times longer (try it). I only use Apple Pay if the retail establishment accepts it for the exact opposite reasons. Which means that the consuming public might be equally divided. Hmmmm.
I am sure what you say is true about the authorization time but, honestly, I really don’t see this as much of an incentive. It’s not like card authorization times take all that long. And it’s often done while talking to the assistant or purchases are being bagged. I guess there is a consumer division on this and that old habits die hard!
I have to agree with Bob here in that my personal incentive to adopt Apple Pay has been to avoid the process of taking out a card, swiping or dipping, putting it back, etc. It’s just so much easier to use my phone (which 9 times out of 10 is already in my hand when I am checking out at a store) or my Apple Watch. Either device is easier. The exception to this — when I have to pull out a loyalty card to scan at checkout. This is why Target and Starbucks have got it right in my opinion and they did it without Apple Pay.
Target likewise has completely nailed it with the Cartwheel app – the barcode scanner function ensures I’m always getting promotional pricing over and above the 5 percent discount, and the payment function is easily one to two minutes faster at checkout vs. swiping a credit card.
Quite simply, if there is a compelling reason for consumers to use the wallets versus using another channel/source, they will. And that’s been the challenge to date.
Security concerns will continue to diminish as experience shows that mobile payment methods are, in fact, secure. Coupon redemption will continue to be a big attraction. Eventually, as more merchants accept them, and companies increase their advertising, contactless mobile payments such as Apple Pay and Google Pay will become a staple form of tender. Combined with all the other mobile capabilities and uses mentioned in the chart, this will render the wallet as we knew it obsolete, maybe even before 2025.
For more thoughts, check out my 3-minute video on the topic…
At some point, paying with your phone vs. a card will come down to habit. What will get us there? It must be easy and it must be secure. More secure than a card. Do incentives, etc. help? If I can order and pay ahead of time, that’s a surefire thing. That is convenience on every level. The big key will be security. And that’s my 2 cents.
It’s so interesting to see mobile wallets evolve in the U.S. (SLOW!) vs. Asia, particularly China, where the use is almost ubiquitous at this point. The main reason in my estimation is the existence of all-encompassing platforms of mobile commerce such as WeChat which enable the Chinese consumer to stay on the WeChat platform for everything from social media to all levels of mobile commerce. In the U.S., our digital platforms are fragmented and so people find it difficult to migrate between social and commercial platforms.
The argument about security is stunning in that mobile wallet transactions are inherently more secure due to token technology and should be the main reason to drive adoption (that has been my reason to use Apple Pay and similar mobile wallets as often as possible).
In the end, what will drive adoption to a tipping point will be the younger, digitally and mobile-savvy consumer who will adopt mobile payments as a natural extension of their digital/mobile life.
I am not sure if any incentives, organization or personalization will work best to drive mobile wallet usage especially when the study shows security concerns as the top issue for consumers. I have been a user of the Apple Wallet for two years through my iPhone and Apple Watch. The primary reason is no actual credit card information is moved between the iPhone and the credit card bank. It is done through encrypted codes not credit card numbers which means if the code is intercepted, the information is useless to the collector. This level of security has made me comfortable using Apple Wallet. As consumers feel their information is secure, the use of wallets will increase.
Payment transactions are still the key reason people carry a wallet. They’re carrying cash or cards to buy things and services, or store info like insurance cards. Today, mobile wallets need to replicate this capability efficiently first — which still fails for consumers because:
Security concerns also exist, but I would downplay the consumer expectations here — it’s more a brand trust issue than anything else.
Assuming added value can be offered, the challenge with incentives are that they are short term and unsustainable. Organization is challenging across multiple merchants each with their own apps, and fragmented when achieved. Personalization has some potential — but retailers are still poor at making things relevant. What consumers need is integration with functional value at the time of transaction — e.g. scheduling pickups, store locators, payment options, availability, gift options — enhancing usage and adoption of mobile wallets.
Ananda, I think you’ve nailed it! The organization/integration factor can’t be ignored. I see the biggest hindrance is that once you rely on using a mobile wallet you need to be able to use 100% of the time. And that means not just adoption at all retailers, but also replication of just about anything that would be in your wallet — including loyalty cards, coupons, discounts, credit/debit cards, etc. Some of this is in place today, but definitely not all. And as you said — the inertia is quite significant. While some people (like me) will claim it’s easier to use a mobile wallet than swiping/dipping a card, others will consider it a burden because it’s not what they’re used to. The compelling reason just isn’t there yet for most consumers.
The key for success of the mobile wallet is making it available in more retail outlets. This includes gas stations, grocery stores, convenience stores, etc. Add to this the availability of all types of pay options (Apple, Samsung, etc.) so that there are more options for the consumer and we have a stronger opportunity to use a mobile wallet without thinking. This is what it will take for consumers to use and offset their traditional wallets and habits, and thus substitute their mobile wallet for these.
As with most changes, there has to be a reason and benefit to give up old habits. The Starbucks app is faster and has loyalty points. Amazon has one-click, it’s quicker, easier AND has electronic receipts for warranty and return. Grocery store coupons are floating around somewhere but to my (maybe limited) experience are still mostly on paper. When this combination of factors happens for mobile wallet then the critical mass of benefit for a mobile wallet would be there, given that security is clearly covered.
In a study conducted by finder, the main reason consumers didn’t use digital wallets was that they were happy with their physical credit/debit cards. There just simply isn’t enough justification for them to make the switch. The ease/convenience factor isn’t greatly helped by a digital wallet, and there are the added trust issues (the second most common reason people aren’t using them, according to our study). A concerted effort by payment providers to address both of these barriers is needed.
CONVENIENCE will drive mobile wallet usage. Today’s consumer wants to experience value which is in terms of time and money. Mobile wallet can offer a substantial savings of time ONLY if the consumer does not have to pull out the mobile device. In other words, like others have already stated, there is not a huge time savings in pulling out the mobile device vs. the credit card or wallet. However, if the consumer can select and exit with a seamless transaction, mobile wallet adoption will explode.
This survey makes sense with what I’ve seen — most people are reluctant to rely on their phone as a credit card. (I remember how long it took some people to start being willing to use an ATM — and that was AT the bank. No wonder there’s fundamental suspicion of credit card by phone.)
The behavior of online endeavors makes it far worse. Why trust my mobile device with all the details of my buying when they are desperate to steal my information (or at least the headlines say so)?
In fact, Facebook, Google, Yahoo, and Amazon’s online behaviors tracking and violating privacy hurt everyone and every action in the online space. Trust in online is a “commons” where a few (very big) bad actors hurt trust for all.
I agree with Lee – it must be more secure than a card. Security needs to go beyond PIN numbers and exclusively into bio-ID: fingerprint or voice print. (Facial recognition is not quite there from a security standpoint.) Plus if the phone is lost or stolen, consumers would need a shut-down and wipe option from a remote device.
Customer habits are very slow to change. Overcoming security concerns is an education problem. Adding more incentives to use a mobile wallet has proven to work for Starbucks, the role model for mobile wallets. The more you connect to the wallet (rewards, gift cards, payments, coupons, etc.) the greater chance you have to gain adoption.
If all retailers accepted and encouraged the use of mobile wallets/payments that would help. Eventually plastic cards will be obsolete, but it will take a long time.
The biggest hindrance is that once you rely on using a mobile wallet you need to be able to use it 100% of the time. And that means many pieces need to be in place for consumer adoption:
Then it comes down to generational differences. For example, my young kids are fascinated by the idea that I can pay using my iPhone at a store. Since the first time they saw me do this, every time we go to check out at any store the first thing they say is “tap, tap, tap, use your phone!” and they get excited about the prospect of doing so while they are equally disappointed when we’re at a store that doesn’t support this. When they’re old enough to make their own purchases it’s pretty assured they’ll be relying on Apple Pay almost exclusively! Millennials may have started this trend, but Gen Z and those that come after them will continue to increase the adoption level organically.
Like with all new technology, customers are going to need to see a lot of value before making the switch. Mobile wallets have to be easier, more convenient, and secure before widespread adoption. The jump from cash to card was clearly driven by card being more convenient and easier to use. The gap from card to mobile just isn’t that big yet.