There are plenty of mobile payments options available in today’s smartphone-driven world, and it seems new ones are popping up every day, so you’d think we would be using mobile wallets to pay for everything from that daily cup of coffee from the local coffee shop to the flat-screen TV from the big box store. But it is not so. Plenty of us are using mobile payments, and there are more coming on board all the time, but the fact remains the rate of adoption is far from ideal.
At a recent Bank Customer Experience Summit, a panel of experts discussed the lack of enthusiasm for mobile payments, and they came to the conclusion that consumers’ security concerns are likely to be the reason, although those concerns are driven more by unfamiliarity with certain products than anything else.
Lack of Education
While consumers’ anxiety about security and other issues can be addressed, one issue that is of more immediate concern — according to the latest report from the Federal Reserve Bank, 65 percent of consumers don’t see any benefit to paying with a mobile wallet. Fortunately, consumers can be educated about mobile payments and shown that they can often be safer than using credit cards — they are certainly more secure than magstripe cards — and through encouraged usage, become more familiar with mobile wallets. However, if the lack of interest is because consumers see no benefit to using mobile wallets, they will simply continue to use more familiar tools.
Part of the reason for the disinterest may be due to there being many different “pays” available. From the smartphone manufacturers’ Apple Pay, Android Pay and Samsung Pay, to the various banks like Chase and Fifth Third that have their own payment apps, to stores such as Walmart and Kohl’s that have proprietary mobile payment systems, it has been a lot for the average consumer to absorb in a short amount of time. And studies have shown that too much choice can be overwhelming, and cause us not to make any decision.
It also doesn’t help that the United States is far behind other markets, like those in the United Kingdom and Australia, when it comes to “tap to pay” terminals. There was some hope that mobile payments would take off in the U.S. after the implementation of the EMV liability shift, which moved us from swiping our magstripe cards to inserting our chip cards into terminals and letting them remain there until the transaction was completed, a process that could take up to 15 seconds to complete. While the time it takes to complete an EMV card transaction has gone down to 5-10 seconds, that is still much longer than a magstripe swipe takes, and yet mobile payments have not grown much over the last 12 months.
Toward the end of 2015, about 17 percent of iPhone owners had used Apple Pay, with approximately 7 percent of Android phone owners trying Android Pay, in a market that saw Apple Pay installed in less than 50 percent of iPhones and an even smaller number of Android phones with Android Pay. A year later, and with many more smartphone models capable of mobile payments, usage had not really changed in the U.S. Yet in the UK and Australia, although they are in the relatively early days of using smartphones to pay for goods and services, there has been a much higher rate of adoption, with a majority of consumers paying with their smartphones and/or using their NFC chip cards on tap-to-pay terminals on a regular basis.
Mobile Payment Security
Despite the high number of apparently disinterested consumers, security is still the number one reason the rate of mobile payment adoption is not higher in the U.S., which is not surprising, given the number of high-profile data breaches that have happened in the last few years, yet the Britons and Australians have wholeheartedly embraced mobile payments. This CNet article explains why mobile payments may actually may be the safest and most secure way to pay. There is hope for Americans, as a study from Creative Strategies showed that 45 percent of consumers said they would be willing to use mobile contactless payments if retailers and banks helped them understand the security benefits of using them. This point was listed as the single biggest thing retailers and banks could do to get consumers to adopt mobile payments.
There is no doubt the U.S. is moving towards a day when paying for goods and services with our smartphones is just as commonplace as paying with cash or credit cards is today. However, it appears that banks and retailers are the ones who must do more to help guide and lead American consumers toward that point in time, showing them that mobile wallets are the safer and more secure way to pay.