Data: The reality of mobile payments

Mobile payments technology has fallen short of expectations in major markets, particularly the U.S., where less than 10 percent of consumers routinely use devices to pay in stores — despite more than four years of aggressive development from large technology companies and banks.

Initial obstacles like the lack of Near Field Communication-enabled devices have been addressed, and merchant acceptance is slowly improving, yet U.S. consumer interest in mobile payments has flatlined, according to many studies.

To explore consumers' resistance to adopting new payment methods, some research firms are digging into behavior science. What follows are highlights of what data is revealing about consumers' perceptions versus the reality of mobile payments.

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Most consumers agree that mobile wallets are convenient and easy to use, but other payment forms usually win out for routine payments, according to a recent survey from ATM provider Cardtronics. Edelman Intelligence conducted an online survey of 1,000 U.S. adults between June 18 and June 27, 2018 on behalf of Cardtronics.

Ninety-six percent of respondents said cash is easy to use, followed by 90 percent who said the same of credit cards, and 87 percent who listed debit cards as easy to use, reflecting the fact that debit sometimes requires a PIN. Only 77 percent of consumers ranked mobile wallets as easy to use.

This finding is somewhat ominous, given the fact that developers originally pitched mobile payments as significantly more convenient than toting cash to stores.
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Why do U.S. consumers overwhelmingly prefer paying with cards or cash versus using a mobile handset, despite one of the highest rates of smartphone ownership in the world? Research firm Simon-Kucher sought to understand the reasons in a survey conducted earlier this year among about 600 U.S. adults.

Apple Pay made its debut in October 2014, creating a tidal wave of headlines and a tiny slice of enthusiasts. But the mobile payment method has failed to catch on with most consumers. What’s more alarming is that Apple Pay usage may even be on the decline, with the emergence of some new technology issues.

Apple’s Face ID authentication method, introduced a little over a year ago, replaced Touch ID on iPhone X handsets. Face ID requires more practice and precision than Touch ID, according to reports. But using Apple Pay with Face ID calls for a different step compared with the Touch ID, which merely requires fingerprint authentication and waving the phone near the terminal.

To initiate Apple Pay with Face ID, users must first double-click the phone’s side button, authenticate with facial recognition and wave the device near the terminal. One observer noted this month in Forbes that using Apple Pay with Face ID can be challenging for consumers rushing through mass-transit turnstiles.
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Many consumers perceive cash and card processing times as faster than mobile transactions, despite the fact that mobile payments are actually quicker than other payment methods, according to field tests. The reason consumers have the opposite perception is rooted in expectations, Simon-Kucher researchers said.

Behavior science suggests that consumers perceive the moments when a consumer holds a mobile phone in mid-air over the terminal to be longer because the consumer is motionless. By comparison, when paying with cash, the consumer is constantly in motion to extract money and exchange it with a cashier, distorting time, according to Simon Kucher.

“We do certain things due to perceptions that may not be correct, and to get people to do something that’s objectively easier but perceptively not, you need to remove the perceptive barrier,” said Wei Ke, managing partner at Simon-Kucher.
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The simple force of habit is one of the biggest psychological barriers deterring consumers from adopting mobile payments, according to Simon-Kucher's research.

More than half, or 66 percent of consumers, said they stick with cards and cash because it's a shopping tradition. Another obstacle is general consumer fear of fraud and identity theft, cited by 39 percent of respondents. This concern has some legitimate basis because of ongoing reports about widespread data breaches and warnings to consumers to protect their payment information.

Other reasons consumers give for not adopting mobile payments are less clear. Almost one quarter, or 23 percent, said they are “not tech savvy,” pointing to consumer exhaustion with learning new processes. Another 18 percent said adopting mobile payments could expose them to financial risk if they lose their payments-enabled mobile device. Consumers also worry about forgetting passwords and security questions (11 percent), stores not accepting mobile payments (11 percent), frustration with using mobile payment features and technical errors (9 percent each), and also about spending more than they would with cash (7 percent).
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Emphasizing payment account encryption and user controls are key features that could improve consumer trust in mobile payments.

News about fraud on payment cards and e-commerce is increasing confusion about the actual risks of using mobile payments, particularly among infrequent or occasional users of the technology, Simon-Kucher found in its survey. Frequent mobile payment users have confidence in the technology’s security but the majority of consumers—including non-users—are wary. Only 13 percent of non-users believe that mobile wallets are secure, according to Simon-Kucher’s research.

Asked what specific features would make them feel more secure about using mobile payments, about a quarter said knowing payment card details were encrypted would help, while 22 percent said the ability to switch off the mobile payment function would reassure them. Nineteen percent said they would like to control where and when their mobile device could trigger a payment and they’d like to be able to get immediate help from security departments when needed. Eleven percent said they’d feel secure knowing a major bank powered their mobile payment, while 4 percent said they would place the highest trust in a large tech company handling the mobile payment.
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Consumer behavior science indicates that getting people to change deeply entrenched habits usually requires a carrot or a stick. Payment providers are loath to introduce friction in any channel, so disincentives aren’t likely to aid mobile payments adoption. Apart from the actual improvements in convenience and speed, consumers may respond positively to incentives, and respondents to Simon-Kucher’s survey suggest they’d prefer to get rewarded with cash.

Apple, Google and Samsung have all tried giving consumers cash rewards for making mobile payments—usually with a one-time bounty ranging from $5 up to about $30—with mixed results. Samsung has had better luck with a program introduced in 2016 rewarding consumers for the frequency of using Samsung Pay, Simon-Kucher noted in its report.

“Customers need to receive some type of benefit or reward to support and reinforce their new mobile payment habit,” along with continuous marketing efforts to demystify mobile payments and promote the technology in the context of daily routines and shopping, Simon-Kucher concluded.
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Another way forward for mobile payment adoption could be building on consumers’ positive experiences with handsets in the shopping journey, observers suggest.

Among 35,000 consumers GfK surveyed worldwide this year, 36 percent of U.S. respondents said they use their handset to compare prices while shopping. One in three U.S. consumers gather product information and read reviews on their mobile handset while shopping, while about a quarter make purchases in-app. Only 17 percent of U.S. consumers use their handset for in-store payments. GfK conducted its survey online in August 2018.

Outside the U.S., consumers are more likely to pay in stores with their handset. In the Asia-Pacific region, including in China where Alipay and other QR code-based mobile wallets are popular, 29 percent of consumers said they would likely use their mobile device to make an in-store payment. Worldwide, the average of consumers likely to use their phones to pay in stores was 19 percent, Gfk said.
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