Another year, another chance for the mobile wallet players to attempt to get consumers to change their in-store payment habits away from plastic cards and towards the phone as a payments form factor.
It has been slow going so far. Despite there being a “…” Pay for every day of the week, none have broken through enough to even make it to a 10 percent usage rate among consumers available to it. The most used mobile wallet in the U.S. as of 2017, according to the PYMNTS/InfoScout data is Walmart Pay with a usage rate just a shade below 6 percent (5.95 percent to be exact). The anchor-man in the line-up is Android Pay – which has yet to crack the 2 percent mark.
In absolute terms, mobile adoption in the U.S. is slow – and by comparison with a market like China’s it is glacial. In 2016, the value of smartphone payments in China hit $5.5 trillion — compared to the $112 billion market in the U.S., according to IR Search. That roughly 50-fold difference in size denotes that in the U.S — and to a somewhat lesser extent, Western Europe — mobile payment is an emerging option that is still finding footing with use cases.
China’s mobile payments are increasingly a baked-in part of the fabric of commerce — literally all of it, down to the street musicians of Shanghai and Beijing who put up boards with QR codes on them so passersby who no longer have cash and coins easily at hand can still pay them.
“It has become the default way of life now,” said Shiv Putcha, an analyst with the research firm IDC. “Literally every business and brand in China is plugged into this ecosystem.”
The U.S. story, on the other hand is far different.
Already Satisfied Customers
The big fall off when it comes to make the jump to mobile is largely in consumer preference- mobile is competing directly with plastic in the U.S., whereas it it more or less was able to leapfrog it entirely in China. And so far mobile is having a hard time breaking through in that competition – when asked by PYMNTS/InfoScout about why they aren’t using mobile methods open to them – the most commonly recurring answer is that they are happy with what they are already using. It doesn’t matter which mobile pay platform one asks about – more than 40 percent of respondents as of September of 2017 will note that they like their cards just fine.
The second most popular answer – for Apple Pay and Walmart Pay, the two most popular platforms – is that they aren’t familiar with how the mobile payments method works. Android and Samsung Pay both had consumers being unsure if the store they were at accepted the payment method as a leading second reason. Unsurprising for Android, since it has such a low penetration rate, but somewhat surprising for Samsung Pay which uses the fact that it works anywhere a credit card is accepted as a main selling point.
The data shows consumers are increasingly more aware and knowledgable about mobile payments. When looking a the top two methods – consumer confusion about how to use the system is on the decline, as are concerns about the relative security of mobile next to more familiar form factors. Nor does it seem to be a blanket refusal to try a new thing – nearly 25 percent of potential Apple Pay customer have used it at least once and a little over 22 percent of Walmart Pay customers can say the same according to the data.
But when push comes to swipe, dip or tap; customers aren’t seeing a reason to make the broader switch and thus make a point of using mobile.
This has left the much promoted – but still underperforming – “Pays” pushing to give customers more than a new form factor.
Walmart has made the most concerted effort in this regard – but as the largest physical retailer on Earth by sales and size (but not market cap) they may have the most options in this regard. Walmart Pay has been part of a broader push by the retailer of value-added digital solutions around money and customer services the company built into the app that houses Walmart Pay. Consumers can also use that app to initiate wire transfers through MoneyGram, check gift card balances, apply coupons and have all receipts sent automatically to its Savings Catcher function.
More explicitly – during the holiday season, Walmart also synced it store-card based rewards with its mobile wallets, such that all in store purchases make on a store card pay got a 3 percent cash back reward. Generally the 3 percent reward tier is reserved for purchases made online through Walmart.com – the regular in store reward is 1 percent.
Target made a similar move with the rollout of its digital wallet product – also tied to its store-issued REDcard and its standard 5 percent cash back reward. That 5 percent is a sunk reward – customers also get it by paying with plastic – but Target is offering its digital wallet as part of its suite of digital services, and thus tying it directly to its Cartwheel savings catcher.
Wallet in the Target app makes checkout easier and faster than ever,” said Mike McNamara, Target’s chief information and digital officer. “Guests are going to love the convenience of having payment, Cartwheel offers, weekly ad coupons and gift cards all in one place with Wallet.”
The non-store affiliated Pays don’t quite have the direct control of an entire retail experience – though they too seem to be pushing better inducements to mobile.
Apple Pay, the granddaddy of these services and the once leader of the field – has released its P2P service Apple Pay cash into the wild in the hopes that a wider range of digital payment services will push a wider adoption by its massive consumer base. The early reviews are rolling in – and while they are largely positive – there is also a building consensus that Apple as its work cut out of it since the space it is entering is home to Venmo – PayPal’s well established an very popular P2P payments service – and Zelle, the bank-back alternative that rolled out last year.
But Apple has also been pushing more direct inducements, most recently in a pair-up with Fangango. Movie fans who pay using Apple Pay on the app will receive a $5 credit. The number “5” was big in mobile promotions this season it seems – Chase (which has also struggled to gain traction despite the massive base of Chase card customers) is offering 5 percent cashback rewards to customers who use their Freedom cards within Chase Pay, Android Pay, Samsung Pay, or Apple Pay. The program at rollout – however- was limited to gas stations or when paying for your internet, cable TV, and phone service.
The multi-billion dollar question – of course – is will any of these promotions push more adoption? And to a limited extent, the answer is probably yes, a few more consumers will give a digital wallet a chance, particularly if they get a slightly better reward for so doing.
Long term though – the inducements are really too small to really change habits en masse. Customer like their cards – and Walmart customer also really like their cash. Card holders are already rewarded- and are used to those rewards, the digital wall is still not distinct in that regard.
But the segment remains worth watching – if for no other reason than the model is changing, for retail based payments systems especially, to be re-orienting away from payments and even discounts, to fuller service offering tied to mobile payments. That has show early traction at Walmart, and it will be interesting to see how that spread in 2018.