Why the U.S. still isn't fertile ground for mobile wallets

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CHICAGO — Mobile wallet adoption in the U.S. is slow, and the payments industry has only itself to blame.

U.S. mobile payment activity pales compared with other parts of the world, particularly China, where 25% of consumers say they use their mobile device as a tool when shopping, 37% say they also use it to make a payment. In the U.S., 35% use mobile to enhance the shopping experience, but only 3% use it to make a payment, according to new figures from GfK consumer research.

With that type of discrepancy, at least the U.S. payments industry knows what works in other regions and, in general, what U.S. consumers want and need to make the transition to digital payments as a regular habit.

But there is a sense that the U.S. market has floundered under spotty education about mobile wallets, inconsistency at the point of sale, an uneven pattern of merchant acceptance, consumer mistrust in the security of mobile, and consumer confusion and "fatigue" with the number of wallet apps available.

In the U.S., there is a growing uncertainty over which of the "Pays" — Apple Pay, Android Pay and Samsung Pay — to choose from. IPhone users may default to Apple Pay, but Samsung phone owners may not know why they should pick Samsung Pay over Android Pay or the growing range of retailer-specific options like Walmart Pay and Kohl's Pay.

"From a consumer perspective, there are so many containers that are housing their information," Zavida Mangaru, head of omnichannel product development at Total Merchant Services, said this week during the annual Mobile Payments Conference, which focused on the mobilizing of retail.

"Right now, you have to download and have these containers [wallet apps] all over the place for your coffee or your travel, and if we are really going to drive change, we have to have a single container that drives value and works end to end for payment, loyalty and engagement," Mangaru said.

Merchants have been trying to use mobile to deliver better customer experiences and security, while also keeping the cost of acceptance low. If those issues remain unresolved in the merchants' minds, then more widespread acceptance won't happen.

"That's created a challenge in the payments space because we are now involved in these conversations that we never had before with merchant stakeholders," said Michael Roberts, chief marketing and digital strategy officer for Bank of America merchant services.

Despite these issues, Bank of America has decided to support the ecosystem of third-party wallets rather than try to displace them with a bank-branded app.

Bank of America is seeing "plenty of winners making inroads in mobile payments," Roberts added. "It is based on the ability to integrate digital into the overall customer experience."

Those that are successful are not just focused on payments, he added. They are focused on all aspects of the customer experience, including in-store and online.

For their part, payments providers can pay attention to three vital traits for consumers considering mobile — speed, convenience and hassle-free service, said Randy Vanderhoof, director of the U.S. Payments Forum.

"So far, mobile and contactless payments have not delivered on those three things equally well," Vanderhoof said.

Even though the use of a mobile wallet should be faster than waiting for an EMV chip card transaction to be approved, the doubt in the consumer's mind remains, Vanderhoof added.

"When thinking about paying with a phone," he said, "the consumer still wonders if the merchant accepts it, or it may or may not work the way it is supposed to, depending on terminal, phone and how the consumer positions it. We still have that uneven consumer shopping experience, whereas with a card, they know what it does and how it works."

As much as anything, Vanderhoof said, consumers in the U.S. have to get into a "repeatable behavior of activity that translates to muscle memory" when making a mobile payment. In that regard, the U.K. has been a step ahead of the U.S. because its residents already make contactless mobile payments on the transit system every day, and they carry that habit into retail stores, he added.

It certainly won't hurt mobile adoption if merchants understand the value of bringing more transactions in-store by accepting mobile wallets because consumers are increasingly using their devices for other shopping tasks, said Jack Connors, head of commerce partnerships at Google.

"We are seeing a shift where NFC enablement isn't becoming an independent decision, it's becoming a dependent decision driven by whatever the opportunity is around shopper acquisition, sales growth and engagement," Connors added. "I do believe we will get merchants to incrementally drive that kind of behavior, so if a consumer goes to a merchant with deep integration with a wallet, they would participate if it delivered value."

And it wouldn't hurt the payments networks and acquiring banks to provide "a carrot" incentive for merchants to engage with wallets and adopt Near Field Communication technology for contactless payments at their terminals, Connors said.

"There is no incentive for a retailer to accept contactless payments in a vacuum, but they will do it in conjunction with marketing opportunities," Connors added. "An incentive to accept contactless would drive the industry in the right direction and would be good for shoppers and merchants as well."

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