Our smartphones have replaced MP3 players, compact cameras, and handheld video game consoles, but they still haven’t killed off wallets or purses. Even though you can use all the latest Android smartphones or iPhones to pay for your goods and services, most of us don’t.
Only 21 percent of people with Apple Pay, 14 percent of those with Samsung Pay, and 10 percent of people with access to Android Pay on their smartphones have actually used it, according to surveys by PYMNTS.com. To make matters worse, most of those people tried it once and then went back to cards and cash.
“There are three factors right now limiting mobile payment adoption: Value proposition, lack of ubiquity, and fear,” Daniel Csoka, managing director of Mobile Money Matters, told Digital Trends. “What is the value proposition for me to make a mobile payment? My credit card works just fine.”
“It needs to work everywhere, every time.”
Respondents to the PYMNTS survey agree. They consistently gave satisfaction with their current payment methods as the main reason for not using mobile wallets, followed by uncertainty over how it works, and security concerns.
If you’ve tried mobile payments yourself, then you’ll understand the issue. It’s often faster to slip a card from your wallet and insert or swipe than it is to pull your phone out, unlock it, and complete your purchase. You also have to consider whether the technology is supported at the checkout. The last thing you want to do is get to the register and discover that the terminal won’t accept your payment method.
“It needs to work everywhere, every time,” Csoka said. “That’s why my card works so well, because it always works everywhere. We still don’t have ubiquity on mobile payments — some are NFC, some are QR codes, Apple Pay can’t talk to Android Pay, and with all these different payments sources, the merchant has to decide what to support.”
Outside of major cities, you’ll find it difficult to get by on mobile payments alone, and even in cities you’re generally limited to larger businesses. Only 36 percent of the merchants surveyed by J.P. Morgan Chase recently accept digital wallets today, but a surprising 69 percent of merchants expect to be accepting most of their payments using a digital wallet within five years. Interestingly, only 41 percent of consumers think they’ll be making most of their payments via mobile in five years.
“This is no different from when debit cards were introduced,” Ben Colvin, senior vice president of North America Security Solutions and Processing at Mastercard, told Digital Trends. “Consumers want to feel the means with which they’re paying is safe, but more, that they’re confident it will work.”
That confidence will surely build through experience, though progress looks to be much slower than many predicted. Even if the technology works and it’s available in most places, folks still need a compelling reason to change their habits.
“People are asking: Is it better than what I’m doing today?” Colvin said. “That usually becomes, ‘is it easier or quicker, or do I feel safer using it?’”
The security issue for mobile payments is an interesting one. There’s a general fear that mobile payments may be insecure, but it’s tied to personal information. A Mastercard survey found that 77 percent of Americans are anxious about their financial information and social security numbers being stolen or compromised, and 55 percent said they would rather have naked pictures of themselves leaked online than have their financial data stolen.
Concerns about identity theft and loss of funds are understandable, but they may be misplaced when it comes to mobile.
“A mobile payment transaction is safer than a card transaction.”
“A mobile payment transaction is safer than a card transaction,” Csoka said. “It’s like the early days of online payments, no one wanted to put their credit card online because they were worried hackers were going to steal it. We’re seeing that same trepidation with mobile payments.”
Since Apple Pay, Samsung Pay, and Android Pay are all pass-through technologies, that allow you to add and use cards, if you wanted to dispute a transaction, then you would take it up with the card issuer.
Your smartphone potentially adds extra layers of security because you must be in possession of the device and it has built-in location tracking, there’s also biometric authentication via fingerprint or iris scanning, and there’s scope for behavioral analysis.
“With behavioral biometrics, you can get that additional level of authentication without the consumer realizing it – creating a truly frictionless experience,” Colvin explains.
Mastercard recently acquired NuData, a security firm that draws on session and biometric information to analyze online, mobile app, and smartphone interactions, so it can distinguish authentic users from fraudsters and flag high-risk transactions.
In security terms, this kind of technology could make life for criminals very difficult indeed. It also has implications for convenience. One day soon, we may be able to walk into stores, pick up what we want and leave without swiping or tapping anything.
Csoka envisions a near future where our smartphones add value for merchants and consumers, and the shopping experience is “Uberized”. Picture this, if you will:
You drive to the mall and use your mobile app to get access to special VIP parking, because you’re a valued shopper. The mall now knows that you’ve arrived and Brooks Brothers sends you a notification that the blue blazer you were looking at online is in stock. You use indoor maps on your mobile to locate the store and, as you approach, a beacon informs the sales staff that you’ve arrived. There’s no register, but the assistant has an iPad and your photo and profile automatically pops up with details on what you want. They have the blazer ready, but also point out a buy-one-get-one-free deal on matching shirts. You try the blazer on, decide to take it along with the shirts, and simply walk out. The receipt is emailed to you.
This is personalized shopping, done in the cloud, and authenticated by your phone and store profile.
“Effective loyalty and offers combined with customer engagement, all surrounded by the fact that this is more secure than a credit card — that’s the winning combination,” says Csoka.
You’d be forgiven for having privacy concerns. The kind of system Csoka is talking about would require you to opt-in and agree to be tracked, though you might be surprised at the level of smartphone tracking that already goes on. Using a combination of apps and beacons, some companies already map your journey around a store, and they can tell if you spent ten minutes in front of that new LG OLED TV.
The companies that are vying for a slice of mobile payments have some good reasons for doing so. It’s not just about the bottom line. Walmart may be able to save on interchange fees with its own payment system – interchange fees are charged by card issuers and average 2 percent of transaction value in U.S. – but the data might be even more valuable to them.
“If I use my card they only know how much I spent, but they want to know what I bought,” says Csoka.
We know that tech giants like Google are drawing enormous value from big data, and so the battle for our mobile payments will rage on. But, while the value for merchants and payment providers isn’t that hard to see, the value for us is still not so clear.
The idea of ditching the physical wallet and having all our cards, including loyalty cards, on our phones is undeniably attractive for many of us, but it’s not enough. Even when mobile payment systems are ubiquitous, we’re confident that they work, and we’re convinced of their safety, providers are still going to have to persuade us to choose them over plastic, and the biggest stumbling block right now is convenience.