Mobile wallets: In a lull or just another nonstarter?
With the annual Money 20/20 conference going on in Las Vegas this week, now is a good time to take the temperature of what's going on in mobile payments and digital wallets at this point in 2017.
Is the concept toast ... or in a lull?
According to a joint study by JPMorgan Chase and Forrester Consulting the latter just might be the case.
Consumers and merchants are taking a break from adopting digital wallets as they wait for the "next wave of progress," the companies said.
The study describes consumers as being in varying stages of exploring mobile wallets. So-called "power users" are ahead of the curve. The key to widespread adoption will be to convince light users and nonusers of the benefits of mobile wallets.
Meanwhile, merchants are in the process of making technology and infrastructure investments for the next wave of digital opportunities, according to the study.
While the research makes a solid case for a mobile wallet lull, one could argue that the industry never really got mobile wallets off the ground to begin with, aside from the initial launch hype.
The study's own numbers support this view.
The percentage of consumers who prefer to pay with a mobile wallet actually dropped — from 15 percent to 14 percent — in an eight-month period between October 2016 and June 2017.
These numbers are based on answers from 1,500 U.S. consumers age 18-plus who go online at least weekly. While that's a small sample size, but notwithstanding the general wariness the industry might have about how studies are conducted, any kind of decrease in this area should be a cause for concern.
What exactly are providers doing about it?
Consumers are giving companies the blueprint for a useful mobile wallet, but most providers are ignoring them.
The survey lays out features consumers would like to have in a mobile wallet and it's nothing we haven't heard before: order ahead and pay; self-service pay-at-the-table; the ability to use coupons and redeem rewards directly from the digital wallet; and VIP experiences, just to name a few.
We do find some of consumers' desired features in retail-branded mobile apps that are capable of facilitating a payment. But when you look at the major Pays, not all of them provide these kinds of experiences.
Will there ever be a time when I can open Samsung Pay and order a coffee from Dunkin' Donuts without having to access a separate app? Is the merchant giving up too much control in that situation?
Another aspect of this study that's worth mentioning is security.
One of the biggest misconceptions consumers have about mobile payments concerns security. It's a subject that comes up again and again. And it's a pretty complicated one in some respects.
On one hand, we know that encryption and tokenization of transaction data helps to alleviate concerns about mobile payments security. But the industry has not done a good job putting these facts into layman’s terms for the average consumer.
On the other hand, many consumers have concerns about the security of the mobile device itself. Malware threats are a continuous problem, particularly on Android.
Which means that mobile wallet providers can talk about tokenization until they're blue in the face, and consumers will continue to avoid storing sensitive financial information on a smartphone that could be compromised via malware.
What it boils down to is that we're still in the early days of mobile wallets, despite the progress we've seen in the past couple of years. Many pundits continue to point to 2020 as the year when we'll see a true tipping point, and this could still be the case.
Meantime, consumers and merchants will continue to experiment and this experimentation will continue to offer insights into what constitutes the best value in a mobile wallet, if the industry will listen.
Will Hernandez has 14 years of experience ranging from newspapers to wire services and trade publications. Before becoming Editor of MobilePaymentsToday.com, he spent two years as the content manager for PaymentsJournal.com, a leading payments industry news aggregator and information hub published by Mercator Advisory Group. Will spent four years covering the payments industry as an associate editor for multiple publications in SourceMedia's Payments Group based in Chicago.