February 9, 2017

Mobile payments | Why aren’t consumers biting?

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There are plenty of futurists preparing consumers for the next wave of tech: pretty soon, they say, all our cars will drive themselves, all our household devices will listen in on our conversations and predict our desires, and there will be no need for wallets – cash, card and check payments will be obsolete.

 

But don’t toss out your money clip or pocketbook (or your car keys, for that matter) just yet. The reality of mobile payments at present isn’t quite as ubiquitous as its potential, and currently, no method of mobile payment comes anywhere close to catching up with more traditional payment methods.

 

Theoretically, the concept is appealing – it’s a way to pay without having to rely on any physical token that could potentially be lost, left behind or stolen. So of more than 2 billion smartphone users globally, why aren’t more people taking advantage of mobile payments?

 

An October 2015 report from eMarketer showed U.S. shoppers made $8.71 billion in mobile payments in 2015, a number predicted to rise past $27 billion when 2016 numbers are available. Yet adoption rate among consumers is still relatively low. The same report predicted 37 percent of millennials will be using mobile payments by the end of 2017, but only 6.3 percent of people over 65.

 

“Younger consumers generally have fewer apprehensions when it comes to experimenting with and eventually adopting new technologies,” said eMarketer analyst Bryan Yeager. “That’s certainly true for mobile payments, where security concerns are more pronounced among older consumers. Ultimately, mobile wallets will need to have a strong track record of security to attract more users across all demographics long-term.”

 

Turns out, the older generation could be right to worry. A 2015 Mobile Payment Security study from global cybersecurity association ISACA surveyed more than 900 cybersecurity professionals and found almost half of them (47 percent) didn’t consider mobile payments secure.

 

According to the professionals surveyed, the top five security risks to mobile payments are:

  1. Use of public WiFi
  2. Lost or stolen devices
  3. Phishing/shmishing (phishing attacks via text messages)
  4. Weak passwords
  5. User error

 

Still, certain methods of mobile payment have seen quite a bit of success. Penny Gillespie, research director of digital commerce for analyst firm Gartner, calls Paypal one of the biggest alternative-payment success stories so far, with a payment volume of more than $80 billion in each quarter of 2016.  

 

Steve Gilde, a global payments executive at performance management software company IR, believes part of the reason mobile payments haven’t taken off yet is because there are too many options available to consumers. He told CIO that consumers just want an easy way to pay, and “it’s hard for any one mobile wallet provider to say they deliver that today.”

 

The same confusion holds true for retailers considering delving into mobile payment acceptance. It can be difficult to know where to start, how to keep transactions secure, and which (if any) options are worth the risk and reward heading into 2017.

 

This is one area where it’s fine to take adoption slowly. While some consumer demographics are clamoring for the opportunity to visit your stores with nothing more than a smartphone, studies show retailers need to continue concentrating on an old standby: cash. Cash continues to be the most frequently used retail payment method, even when other options (including mobile payment) are available, and the future of cash is expected to hold steady.

 

You might experience the rise of self-driving cars in your lifetime. But don’t count on being able to ditch your wallet.

 

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Image: iStock