Why Contactless Mobile Payment Is Not Favored by American Consumers
August 13, 2019
The following is an economic news about contactless mobile payment. The U.S. mobile non-contact payment drive has lasted for 10 years, with billions of dollars invested in wallet development, POS hardware and consumer marketing. So far, however, the results have been unsatisfactory: 451 Research’s Unified Global Business Forecast shows that payment methods such as Apple Pay and Google Pay are expected to account for only 1.6% of U.S. real retail sales this year ($78.6 billion). It is very difficult for consumers to change their payment habits. Without obvious and better value propositions, it is very difficult for them to replace the inertial means of payment by taking out bank cards from their leather wallets with other mobile payment methods.There are many reasons why mobile non-contact payment has not been a breakthrough success, and there is a lack of value proposition better than plastic cards. At present, contactless wallets are solving the problem that most people do not have – the problem of using traditional payment methods in POS. Plastic credit cards and debit cards have not been broken, although it can be said that contactless wallets trade slightly faster than EMV, but for ordinary consumers, this is far from enough. (Note: EMV is the international financial industry for smart payment cards and usable chip card POS terminals and automatic teller machines (ATM) and other standards. The three letters of EMV refer to Europay, MasterCard and Visa, the first three companies to develop the standard.)According to the results of 451 Research’s User Intention Survey in the second half of 2008, the two main reasons why consumers do not use mobile payment are “inclination to use traditional payment methods” and “no need / no interest”. Until wallets become significantly better than existing payment methods, it will be difficult to bridge the gap between early users and mainstream consumers.
Limited businesses support value-added services. Contactless mobile payment acceptance networks continue to grow in the United States, largely thanks to the transition to EMV that began in 2015. Today, more than 60% of Visa’s transactions in the United States occur in non-contact locations, and 80% of Visa’s top 100 businesses in the United States provide the ability to “pay by click” at the cash register. Although acceptance is increasing, businesses are making slow progress in implementing value-added services such as Apple Pay and Google Pay, which can redeem loyalty and rewards by clicking on Contactless transactions. This requires software updates for POS terminals and mobile development, but businesses do not prioritize it, mainly because the proportion of contactless mobile payments between customers is relatively low.
The results show that the operation of “getting product/service discounts” is enough to attract nearly one third of non-digital wallet users. Since 451 Research began tracking consumer mobile payment sentiment nearly a decade ago, security issues have been seen as the primary factor limiting adoption. Only a quarter of consumers think digital wallet transactions are very safe, and only a third think they are safer than traditional credit cards. In addition, “security against fraud is better than traditional payment cards” is the primary reason non-users cite to encourage them to use digital wallets. This is a bit confusing, because wallets like Apple Pay bring technologies including biometrics and payment tagging that significantly improve security compared to plastic cards. All participants in the value chain, including purse suppliers, card issuers and payment networks, are responsible for strengthening consumer education and eliminating persistent misunderstandings.
Despite the slow start, there are reasons to be optimistic about the long-term prospects for non-contact mobile payment in the United States. First, supportive infrastructure, arguably the biggest challenge facing the industry so far, is finally in place. Consumer surveys show that 94% of U.S. iPhone users have Apple Pay compatible devices, while Visa data shows that most card traffic in the U.S. is now through contactless POS terminals. With the foundation for growth, the focus must now shift from empowerment to value.
The migration of major transport systems (including MTA in New York and MBTA in Boston) to open-loop non-contact ticketing will be an important turning point in non-contact payment. Many consumers will soon be able to use credit or debit cards connected to non-contact wallets to cross the turnstile without having to guess the balance of the transit cards and wait for funds to be loaded on the transit machines located at the subway stations. This has become a reality in Portland, Oregon and Chicago. Transportation is an important use case because it promotes mobility as an excellent payment method by minimizing friction, and it is a high-frequency payment behavior that encourages consumers to use their electronic wallets in different types of businesses.
It is also encouraging that Apple is trying to expand the use of Near Field Communications (NFC). For example, Apple and Ticketmaster work together on Contactless ticketing and PayByPhone parking to eliminate the need for registered applications. In addition, businesses like Dairy Queen and Maribou Coffee are involved in NFC tagging, which simplifies the registration of loyalty programs. These types of non-payment use cases are important developments to increase the overall value of non-contact mobile wallets and improve consumer comfort.