Why Mobile Wallets Haven’t Taken Off

clockicon 5 minute read

FuturePay-Mobile-Wallets

 

Mobile wallets have been the buzz around the retail industry with some experts touting them as the next big thing, however mobile wallet adoption has thus far been unimpressive. Why is that and is there something we can learn?

 

The Current Situation

 

What is the current situation with mobile wallets, particularly the big three – Apple Pay, Android Pay, and Samsung Pay? Unfortunately, not so hot.

 

While none of these companies are quick to share their numbers, data from PYMNTS suggests that of the 187 million smartphones in the U.S. only 6 million Android users and 14.4 million Apple users even have the hardware and software required to conduct mobile wallet payments.

 

And it may be getting worse. The numbers show that Apple Pay usage is down 41% from the previous year, and suggest that shoppers are consciously choosing different payment methods, and specifically are choosing a card.

 

Why They Haven’t Taken Off

 

While there are a number of factors contributing to the slow adoption of mobile wallets in the US, perhaps the largest contributor is the lack of certainty surrounding them. Many consumers aren’t certain how a mobile wallet works, what stores they work at, and if one will even work on their device. As a result, many merchants aren’t certain they will see an ROI on investing in the new terminals required to accept mobile wallet payments, so they avoid doing so.

 

In many ways, this lack of certainty is the product of a lack of consistency. Mobile wallets were flaunted as something of a catch all for payment cards, loyalty programs, and promotional offers, and they haven’t exactly lived up to that description. In fact, most mobile wallets have fallen quite short of that, requiring users to have a specific device and to shop at specific stores.

 

But that’s not the only source of inconsistency. Virtually all the of major mobile wallet providers have opted to use different technologies and applications, in the hopes that their own payment system becomes the standard. They have different authentication methods, different payment experiences, different banking partners, and different stores where they are accepted. As a result, consumers aren’t sure which of the new methods to adopt.

 

What’s most concerning is that this lack of consistency is turning shoppers off of mobile wallets.

 

Consider the Apple Pay adoption numbers. Of the people that could use Apple Pay but haven’t tried it, 47% simply say they are satisfied with their current payment method and aren’t motivated to change (up from 32% a year ago). Of the people that do use Apple Pay, the percentage that use it “every chance they get” fell from 48% in March 2015 to just 21% by June 2016. In fact, the majority of people that have used Apple Pay see little to no difference in terms of ease of use (58%), speed (56%), and convenience (49.6%) when compared to swiping a card to checkout.

 

But there’s another reason why mobile wallets aren’t taking off. It’s because the apps aren’t built for consumers, they’re built for the providers.

 

Built for the Providers

 

The providers are concerned with getting people to use their app, on their device, to shop at their partner stores. And while that sounds great if you’re Apple or Samsung, it isn’t so great for consumers. Think about it. You need to get a specific device, download the app, upload your cards, figure out where you can use the mobile wallet, and even then you still need to line up like everyone else.

 

Even Apple Pay’s latest move into using mobile for ecommerce has been hindered by their attempt to capitalize on shoppers at every step. Apple Pay can now be used to buy online, but only if you are on an Apple device, using the Safari browser, and have an iPhone with a fingerprint scanner. Improving the ecommerce checkout experience was a huge opportunity for Apple Pay to provide users with real value by making online shopping easier, but does it sound any easier?

 

Mobile’s Saving Grace

 

Interestingly, some companies such as Starbucks and Dunkin’ Doughnuts have managed to be quite successful in driving adoption and usage of their mobile payment app. While the Starbucks app is a bit different than typical mobile wallets, it still requires users to download an app, upload a payment card, and open the app when they want to pay – so it’s quite comparable.

 

Starbucks reports that 21% of their sales come through their mobile wallet, which translated into a little over $1 billion in revenue in Q4. So what are they doing right that other providers can’t seem to match?

 

There are two keys to Starbucks’ success. First, they created a mobile app that was compatible with any smartphone as well as any of Starbucks’ POS systems. This removed the uncertainty that is holding back mobile wallets, and made customers feel confident that they can use the Starbucks app to pay in any store and on any mobile device. Second, they pushed adoption and usage further by integrating a loyalty program, purchase rewards, and an improved buying experience.

 

One of Starbucks’ more recent improvements to their mobile payment system is the ability to order ahead and skip the line up in-store. With Starbucks’ Order & Pay app, you can order and pay for your coffee ahead of time then simply walk in the store to pick up your drink.

 

Removing Uncertainty

 

What do Uber and Facebook have in common, aside from being giants in their respective industries? They eliminated uncertainty. A major factor in the success of Uber and Facebook was their roll out strategy, Uber focused on generating a critical mass of drivers and riders in one city and then moved to another city. Similarly, Facebook moved from one college to another, becoming well known at one school before moving on to the next.

 

And this is something that no one has managed to do with mobile wallets. At least, not yet. Many shoppers aren’t even sure if their own device supports mobile payments, and far fewer are certain about where they can use a mobile wallet.

 

And therein lies the problem for mobile wallets. As a retailer why would I invest in a new POS terminal without being sure my customers are going to use mobile payments? And as a consumer, why would I adopt a mobile wallet and change my shopping behavior without being sure I can use it at the stores I like? It’s the archetypal matchmaker’s fail – the chicken and the egg.

 

But that’s not to say there’s no hope for mobile wallets. Today we have a better understanding of what consumers want from a mobile wallet and as such can create a better product for users.

 

Enjoy this post? Check out Mobile Wallet: Q1 Status Report and Are Credit Cards the New Floppy Disks? How Mobile Wallets Are Killing Plastic Cards

clockicon 5 minute read

FuturePay-Mobile-Wallets

 

Mobile wallets have been the buzz around the retail industry with some experts touting them as the next big thing, however mobile wallet adoption has thus far been unimpressive. Why is that and is there something we can learn?

 

The Current Situation

 

What is the current situation with mobile wallets, particularly the big three – Apple Pay, Android Pay, and Samsung Pay? Unfortunately, not so hot.

 

While none of these companies are quick to share their numbers, data from PYMNTS suggests that of the 187 million smartphones in the U.S. only 6 million Android users and 14.4 million Apple users even have the hardware and software required to conduct mobile wallet payments.

 

And it may be getting worse. The numbers show that Apple Pay usage is down 41% from the previous year, and suggest that shoppers are consciously choosing different payment methods, and specifically are choosing a card.

 

Why They Haven’t Taken Off

 

While there are a number of factors contributing to the slow adoption of mobile wallets in the US, perhaps the largest contributor is the lack of certainty surrounding them. Many consumers aren’t certain how a mobile wallet works, what stores they work at, and if one will even work on their device. As a result, many merchants aren’t certain they will see an ROI on investing in the new terminals required to accept mobile wallet payments, so they avoid doing so.

 

In many ways, this lack of certainty is the product of a lack of consistency. Mobile wallets were flaunted as something of a catch all for payment cards, loyalty programs, and promotional offers, and they haven’t exactly lived up to that description. In fact, most mobile wallets have fallen quite short of that, requiring users to have a specific device and to shop at specific stores.

 

But that’s not the only source of inconsistency. Virtually all the of major mobile wallet providers have opted to use different technologies and applications, in the hopes that their own payment system becomes the standard. They have different authentication methods, different payment experiences, different banking partners, and different stores where they are accepted. As a result, consumers aren’t sure which of the new methods to adopt.

 

What’s most concerning is that this lack of consistency is turning shoppers off of mobile wallets.

 

Consider the Apple Pay adoption numbers. Of the people that could use Apple Pay but haven’t tried it, 47% simply say they are satisfied with their current payment method and aren’t motivated to change (up from 32% a year ago). Of the people that do use Apple Pay, the percentage that use it “every chance they get” fell from 48% in March 2015 to just 21% by June 2016. In fact, the majority of people that have used Apple Pay see little to no difference in terms of ease of use (58%), speed (56%), and convenience (49.6%) when compared to swiping a card to checkout.

 

But there’s another reason why mobile wallets aren’t taking off. It’s because the apps aren’t built for consumers, they’re built for the providers.

 

Built for the Providers

 

The providers are concerned with getting people to use their app, on their device, to shop at their partner stores. And while that sounds great if you’re Apple or Samsung, it isn’t so great for consumers. Think about it. You need to get a specific device, download the app, upload your cards, figure out where you can use the mobile wallet, and even then you still need to line up like everyone else.

 

Even Apple Pay’s latest move into using mobile for ecommerce has been hindered by their attempt to capitalize on shoppers at every step. Apple Pay can now be used to buy online, but only if you are on an Apple device, using the Safari browser, and have an iPhone with a fingerprint scanner. Improving the ecommerce checkout experience was a huge opportunity for Apple Pay to provide users with real value by making online shopping easier, but does it sound any easier?

 

Mobile’s Saving Grace

 

Interestingly, some companies such as Starbucks and Dunkin’ Doughnuts have managed to be quite successful in driving adoption and usage of their mobile payment app. While the Starbucks app is a bit different than typical mobile wallets, it still requires users to download an app, upload a payment card, and open the app when they want to pay – so it’s quite comparable.

 

Starbucks reports that 21% of their sales come through their mobile wallet, which translated into a little over $1 billion in revenue in Q4. So what are they doing right that other providers can’t seem to match?

 

There are two keys to Starbucks’ success. First, they created a mobile app that was compatible with any smartphone as well as any of Starbucks’ POS systems. This removed the uncertainty that is holding back mobile wallets, and made customers feel confident that they can use the Starbucks app to pay in any store and on any mobile device. Second, they pushed adoption and usage further by integrating a loyalty program, purchase rewards, and an improved buying experience.

 

One of Starbucks’ more recent improvements to their mobile payment system is the ability to order ahead and skip the line up in-store. With Starbucks’ Order & Pay app, you can order and pay for your coffee ahead of time then simply walk in the store to pick up your drink.

 

Removing Uncertainty

 

What do Uber and Facebook have in common, aside from being giants in their respective industries? They eliminated uncertainty. A major factor in the success of Uber and Facebook was their roll out strategy, Uber focused on generating a critical mass of drivers and riders in one city and then moved to another city. Similarly, Facebook moved from one college to another, becoming well known at one school before moving on to the next.

 

And this is something that no one has managed to do with mobile wallets. At least, not yet. Many shoppers aren’t even sure if their own device supports mobile payments, and far fewer are certain about where they can use a mobile wallet.

 

And therein lies the problem for mobile wallets. As a retailer why would I invest in a new POS terminal without being sure my customers are going to use mobile payments? And as a consumer, why would I adopt a mobile wallet and change my shopping behavior without being sure I can use it at the stores I like? It’s the archetypal matchmaker’s fail – the chicken and the egg.

 

But that’s not to say there’s no hope for mobile wallets. Today we have a better understanding of what consumers want from a mobile wallet and as such can create a better product for users.

 

Enjoy this post? Check out Mobile Wallet: Q1 Status Report and Are Credit Cards the New Floppy Disks? How Mobile Wallets Are Killing Plastic Cards