The steady march of smartphone technology makes mobile wallet adoption seem inevitable, but consumers still need convincing.
Transaction-based incentives may do the trick, according to new research from Auriemma Consulting Group.
Providers are battling lukewarm adoption and inconsistent usage numbers. Mobile pay usage declined for the first time in 2016 in the fourth quarter, according to Auriemma, and for each of the mobile wallets studied, the decline was about 2%.
Incentives can reverse this trend. The research showed that 25% of consumers with an eligible smartphone use mobile payment, and they are mostly to be within a desirable demographic — employed, affluent, and college-educated. Of these consumers, 32% recall being offered a mobile pay incentive [compared to 19% earlier in the year], and when the incentive is offered, the take rate is high at the 86%.
Auriemma surveyed 1,505 mobile payment-eligible cardholders in the U.S. for its 2016 fourth-quarter Mobile Pay Tracker report. Of those surveyed, 504 had Apple Pay capabilities, 586 had Android Pay and 415 had Samsung Pay.
Even with the report results indicating a growing consumer awareness and acceptance of mobile pay incentives, the number of those incentives offered declined slightly between the third and fourth quarters.
"Incentives for retail locations where mobile pay users are already customers tend to be the most effective," said Jaclyn Holmes, senior manager of payments insights for Auriemma Consulting Group.
"Incentives also seem to be more effective in driving habitual usage rather than new [transactions] because mobile pay users aren’t necessarily making substantial changes to which retailers they’ll frequent," Holmes said. "Rather, it’s changing how they’ll choose to pay at the point of sale, and when they’ll make the purchase."
Consumers who are offered incentives use mobile payments more frequently than those not offered—demonstrating a clear influence on choice of payment method at checkout, the report stated.
Over a one-week period those who received an incentive to use mobile payments in-store did so 4.6 times, compared to 3.1 times for those not offered an incentive. The same is true of in-app purchases, with shoppers using incentives to purchase four times in a week, compared to 2.4 for those not offered.
Incentives will have the biggest influence "on consumers on the cusp of using the method, but who need an additional nudge," Holmes said.
Though short-term incentives seem to be enough to change behavior, Samsung "kind of broke with the pack" by setting up its ongoing Samsung Rewards program, Holmes said. "However, Samsung linked its program to purchase frequency rather than transaction amount, which helps them avoid the 'table stakes' phenomenon."
In the past, banks primarily offered incentives, but the fourth-quarter study revealed the percentage of bank offers dropped from 58% to 40% in a year. Merchant-funded offers are most prevalent now at 46%.
Regardless of who offered the incentive, nearly eight in 10 respondents report their offer was linked to a specific merchant.
Many consumers, however, are not seeking incentives to pull out their smartphone for payments. Most hear about them from friends, or receive them through emails and letters from providers, the report noted.
Auriemma said the in-depth interviews portion of the study revealed that many consumers with mobile payment capabilities did not bother to look into the incentives because they felt the value, usually in the $5 to $10 payout range, wasn't worth the extra effort.