How Are “Pays” Doing?

Payment systems professionals at banks keeping a watchful eye on mobile pay and digital wallet apps - the “Pays” such as ApplePay, SamsungPay and GooglePay - as well as competition from other alternative payment options, such as the Apple Card, the Google checking account and Facebook’s Libra cryptocurrency that will be held in a digital wallet called Calibra.

Mercator Advisory Group’s most recent consumer survey report, Mobile Payments: Making a Comeback, reports that U.S. consumer use of digital wallets, including universal and retailer-specific options, has been uneven but trending upward. Citing a lot of excitement following their introduction, digital wallet use was reported at 52% in 2016. Usage dropped to 48% in 2018 and climbed back to 60% in 2019. What accounts for the recent year-over-year increase?
  • 34% of consumers used retailer-specific mobile payment apps, the only method that showed growth from 2017
  • 25% of consumers used the so-called universal Pays online and in store
  • 33% of consumers used service-oriented apps like Uber or Fandango to make in-app payments for on-demand services

Still, there seems to be a lot of work to be done to maximize consumer usage.

A Digital Transactions article Millions Sign Up for Mobile Payments—But How Many Stick Around Long Term? reported that while millions of smart phone users have “Pays” pre-installed or downloaded onto their device, relatively few are using them, especially compared to other financial apps. The report points out “nearly 66% of users return to their mobile-banking apps on the day after install, and by the 30th day a relatively robust 15% are still using the app. By contrast, the corresponding averages for all finance apps are 29% and 9%.”
A November 2019 article in Payments Journal noted some possible reasons for the low adoption:
  • Unaware of Security Features – many don’t realize that mobile payments, with tokenization and a wave of the phone at a contactless POS, are often the most secure way to pay.
  • Habit – customers are used to handing over a plastic credit or debit card, and some apps offer little incentive to change. Plus, with a lot of options on how to pay, it can be tough to pick something new.
  • Limited Acceptance – while a steadily increasing number of online and mortar retailers accept mobile payments, a significant number still do not, and in many cases staff may not be adequately trained.
  • Unreliable Apps – if a mobile payment or digital wallet app doesn’t work after a couple of tries, customers might give up.
In August 2019, JP Morgan Chase announced it plans to shut down its Chase Pay app in early 2020, after spending $100 million and just 5 years after its launch. By contrast, there more than a dozen Amazon Go checkout-less grocery stores in Seattle, San Francisco, New York and Chicago, with many more planned. Shoppers download the Amazon Go app and “Just Walk Out Technology” tracks what customers put into a bag (or return to the shelf). When they are done shopping they just walk out the door.  A few minutes later their credit card is charged and Amazon Go sends them a receipt. How does it work? Every move the consumer makes in the store is tracked by video or sensors.
Transaction volume of mobile payment apps is estimated to reach nearly $14 trillion by 2022. 

Source: The Financial Brand, Digital Transactions, Payments Journal, eMarketer, 

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