13 October, 2016

Why Are Mobile Payments Not Yet Mainstream?

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mobile_payments.jpgMany experts believe that by the end of 2016, mobile payment transactions in the U.S. will have grown 210 percent over 2015 figures. As impressive as that figure is, it appears that not everyone who can is taking advantage of mobile payments. Recent studies have found that only 20.7 percent of people in the U.S who have an iPhone that works with Apple Pay (iPhone 6 and later) have ever tried the mobile wallet, and 56 percent of users who have tried Apple pay only used it once in a typical week, with 15.3 percent saying they never use it.

So, why aren’t more people using mobile payments? Why have Apple Pay, Android Pay and Samsung Pay not gone mainstream? The answers are probably not as surprising as you’d think, and the one at the top of many lists is security. Despite mobile wallets being pretty much as secure – or more so – than credit cards, many people still have the perception that they are not secure. At 2015’s Money 20/20 Conference, eMarketer Inc. analyst Bryan Yeager said that “62 percent of U.S. smartphone users that don’t use or plan to use a mobile wallet cited worries about security as the reason.” But mobile devices use tokens to replace account numbers so the merchant never actually sees the customer’s account number and it is never entered into the system. For this reason, mobile payment systems have the potential to be more secure than conventional payment systems. The worst case scenario for a mobile payment transaction would likely be no worse than it would be for a traditional credit card purchase

Beyond security, there are other reasons why mobile payments have not been able to catch on with large groups of people, including the fact that there is no one single standard, either for merchants or customers. Unlike with credit cards – particularly the newer embedded-chip EMV cards – which will pretty much work anywhere in the world, the mobile payments market is fragmented. On the customer side, there is no global standard for payment systems, which makes using a mobile wallet difficult when traveling out of the country. For example, Vodafone’s M-Pesa works just fine in Africa, but is virtually unusable in Europe. This could result in having to install and set up multiple mobile wallets, based on where you are traveling – and then removing all the data before you delete the wallets once you get home. For merchants, the problem is there are too many choices – do you go with NFC, code based (QR code) or cloud based (HCE) payment systems? Each one may be an ideal choice for certain clientele, but they all have their issues, as well. If you have just purchased a new EMV POS system, chances are it comes with an NFC reader. But what if most of your customers prefer code-based or cloud-based systems? The obvious answer would be to find out which system your customers prefer before you invest in any one system, but the hope is that someday POS terminals will be able to accept all forms of payment.

Finally, there is the simplest of reasons – old habits die hard. We are so used to the holy trinity of payment types – cash, check and charge. For years those were our only options. Checks have largely fallen out of favor and are pretty much a taboo in a retail setting these days, and the rise of mobile payments has given customers a new option. But many people are satisfied with the cash and charge options, because they are tried-and-true and familiar, and they know how they work. Mobile payments feels foreign and complicated to them and the idea of tapping their phones on a payment terminal is too strange at this point. Things may get a little stranger still, as some companies are experimenting with using biometrics as a payment solution – using fingerprints, facial recognition and even heartbeats to authenticate a payment. No smartphone-based wallet necessary!

Whether mobile payments catch on with the general public remains to be seen, but as mobile phone manufacturers continue to include mobile wallet apps on their smartphones and companies continue to incentivize them (adding loyalty programs to mobile wallet apps, etc.), they should continue to gain more users. Also, as mobile payment options increase, people should being to feel more comfortable using them. Presenting mobile payments as a safe, secure convenience will help customers view and accept them as the optimal payment solution.

Topics: Apple Pay

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