UNLOCKING CONSUMER POTENTIAL

Transcription

1 UNLOCKING CONSUMER POTENTIAL

2 MOBILE WALLETS IN THE U.S.: UNLOCKING CONSUMER POTENTIAL When Apple Pay launched in 2014, many wondered if Apple was going to shake up the financial services business the same way itunes forever changed the music industry. But three years later, just 25% of all iphone owners have tried Apple Pay. Has Apple lost its magic or is there something else at play? It turns out it s not just Apple. As part of our ongoing MoneyScreen research program, we surveyed over 10,000 Americans and found that just 23% have used any mobile wallet to make an in-store purchase. With usage at 23%, one might wonder if people are simply not aware that they can use a mobile wallet; our research suggests that is not the case. For example, 81% of Americans are aware of PayPal Wallet, 78% know about Apple Pay, and 71% know about Visa Checkout. The question is, are we at an inflection point or a plateau? There is undeniable potential for mobile wallets, with roughly 200 million smartphone users in the United States, per estimates by ComScore and others. 1 And, the average American spends over 3 hours a day on their mobile device. 2 When they want to buy something, it s common to search on mobile first. In fact, 70% of smartphone owners who bought something in a store first turned to their devices for information relevant to that purchase, according to Google s Lisa Gevelber. 3 Knowing that mobile use is ubiquitous and inextricably linked to retail shopping, we have to wonder why mobile wallets have not been able to see the transaction all the way through to the cash register. If we look to two other countries China and the UK we can see the potential, as well as the factors that have driven growth or been a barrier. 2

3 MEANWHILE IN CHINA... China is a shining example of the potential of mobile payments. There were $5.5 trillion dollars spent using mobile payments in China last year up from almost nothing only five years earlier, according to The Economist. 4 Two thirds (65%) of mobile phone users are using their phones as wallets that s an impressive 425 million people. So, why the profound and rapid success in China? One of the differences is that the ability to use a mobile wallet is more integrated. For example, WeChat a phone app with 500 million users has an integrated payment wallet. There are also other kinds of mobile wallets in China. QR codes are very popular and users can simply open their app, scan the code and make a payment. Alternately, users can click and display their own bar code which retailers scan. In China, it s quick, easy and integrated. A recipe for success. many of the payment functions within WeChat or Alipay exist elsewhere in the world, but in disaggregated form: Stripe or Paypal for online shops, Apple Pay or Android Pay for those using their phones as wallets; Facebook Messenger or Venmo for friends transferring money. In China, all these different functions have been combined into single platforms. - the Economist 3

4 THE UK AND WHAT S CONVENIENT In the UK, the percentage of the population that has used a mobile wallet is at parity with the U.S., 24% of consumers, according to an IAB study. 5 There are doubts, though, about how much that will grow, since UK consumers are already used to contactless credit and debit cards that allow them to tap and go. These cards are currently used by 51% of UK consumers 6 and Payments UK expects to see a roughly 10-fold increase in the number of payments that will be contactless in the next decade. 7 Barriers to Mobile Wallet Adoption Is not easier than making a purchase with a credit or debit card Will not help me track my purchases Will not allow me to earn valuable rewards Is not an easier way to make small purchases Less convenient than making a purchase with cash I am afraid this will not work when I need to make a purchase This is not a secure payment option I don t trust the company offering this This will not be accepted where I shop I don t know if I can figure out how to make this work I don t think this will work for large purchases I don t think this will... be around in 2 years 48% 41% 38% 37% 33% 30% 29% 25% 24% 18% 16% 13% Source: Maru/Matchbox MoneyScreen 4

5 WITH THE UK EXAMPLE, WE SEE THAT THE CONVENIENCE OF AN EXISTING TECHNOLOGY CAN CAST A SIGNIFICANT SHADOW OVER THE PROSPECTS OF MOBILE WALLETS. When it comes to mobile payments in the UK, there s a huge hurdle to overcome in order to convince consumers that paying with a smartphone is worth the effort: Contactless cards are so widely available and used among consumers in the region. Until a truly digital society exists whereby physical IDs are rendered unnecessary, physical wallets filled with plastic bank and credit cards will continue to exist. - Bill Fisher 8 5

6 SO WHAT PATH WILL THE U.S. TAKE? McKinsey, a consultancy firm, sees the potential for either continued modest use or a more explosive uptake. They modelled the volume of potential transactions and concluded while the base case conservatively projects in-store mobile wallet transactions will reach $50 billion by 2020, some scenarios forecast significantly greater volumes. 9 Indeed in some of their scenarios they projected a four-fold increase in digital wallet use, reaching $200 billion by Jupiter Research forecasts a market of just over $100 billion 10 in between McKinsey s conservative and optimistic forecasts. emarketer s projections, on the other hand, are optimistic at over $300 billion. 11 It seems obvious that the future for mobile wallets in the U.S. is not yet decided, so what are the potential drivers and barriers? 6

7 BARRIERS TO ADOPTION As part of our MoneyScreen research, we asked about barriers to adoption in the U.S. 1Ease of use is a concern for half (48%) of all Americans. They agree It s not easier than making a purchase with a credit or debit card. And, one in three (33%) say It s less convenient than making a purchase with cash. 2Many credit cards offer rewards, which are assumed to be lacking in mobile wallets. Four in ten (38%) Americans agree it will not allow me to earn valuable rewards. The inability to track purchases is also a common barrier (41%). 3Universal functionality is also a concern for some. Three in ten (30%) agree I am afraid this will not work when I need to make a purchase and one in four (24%) Americans agree this will not be accepted where I shop is a barrier. That is indeed a valid concern perhaps more than they know. Witness the U.S. chip card roll out. 4In 2016, 88% of U.S. consumers had chip cards, but only one-third of U.S. merchants had the proper readers for them, according to MasterCard. Just a small subset of those retailers that can process chip cards can also handle near field communication (NFC) payments from mobile wallets. In 2016, that number was 25%, suggesting that people with mobile wallets had a 1-in-12 chance of being able to successfully use their mobile wallet at a retailer last year. 12 While the number of retailers that can handle chip cards is growing, it s been estimated that 45% of them will be able to handle mobile wallets in 2017 and that this will only grow to 55% in Further, their retailer might not take their particular mobile wallet, according to retailers researched by the National Retail Federation. 13 Fully 68% of them say they plan to accept 1 or very few industry digital wallets (e.g. PayPal, Apple Pay, etc.). Just 24% say they plan to accept as many digital wallets as possible. 6And, last but not least, is concern with security. With one-in-three (29%) agreeing that this is not a secure payment option, a bigger underlying theme that impacts the entire payments industry is highlighted. These factors argue for lower uptake, but what could stimulate demand? 7

8 DRIVERS OF USAGE One of the harbingers of any successful trend is that future generations adopt it. In the case of mobile wallets, 38% of millennials have used a mobile wallet vs. just 6% of baby boomers. Important for dollar volume, usage is also higher (36%) among affluent Americans. The growing Hispanic population who tend to be more mobile friendly are also big users, with 43% tapping mobile wallets. These segments are all potential trailblazers. Some of the specific potential drivers of use are mirror images of barriers. We see that lack of rewards is a potential barrier. An Accenture survey of North Americans who have not used their mobile device as a mobile wallet reported that half would be more enticed if they could get discount pricing or coupons (54%) or reward points (53%). 14 Being able to track purchases is also an incentive for many (48%). Similarly, McKinsey believes a big driver could be the opposite of the merchant adoption barrier mentioned earlier. They wrote The most critical factor will be the ability to attain broad merchant acceptance and the merchants willingness to offer consumers sufficient incentives to motivate substantial digital wallet use, as Starbucks succeeded in doing. 15 Starbucks wildly successful payment app is simple. It modestly copied what was happening in China, allowing consumers to present their bar code and have it scanned by existing, in-store technology. They also offer rewards for regular use. The result; quick and eager adoption. 38 % of millennials VS. 6 % of baby boomers HAVE USED A MOBILE WALLET ENTICING INCENTIVES! 54 % 53 % 48 % Discounts or coupons Reward points Purchase tracking 8

9 MOBILE WALLETS IN THE U.S.: UNLOCKING CONSUMER POTENTIAL Whether mobile wallets will take off in the U.S. or simply co-exist for a time as yet another payment method remains to be seen. The evidence suggests it could go either way. Will your company win or lose? To us, it s all in how you play the game. What s clear is that mobile wallets are not a payment method that will sell itself in the U.S. They will have to be cleverly and carefully marketed. Consumers need to be convinced of ease of use and expect at the very least to be enticed with the rewards they receive now through other payment means. In the bewilderingly innovative and fast moving world of payments in the U.S., mobile wallets have a great opportunity. The question is, are they sleeping giants about to awaken, or will they be sleepy also-rans, soon left in the dust of this turbulent market? There are many ways mobile wallets could work, and many ways they could fail. MoneyScreen allows you to test multiple ideas for selling the virtues of mobile wallets and allows you to compare them to hundreds of other payment ideas, to provide important contextual information about competing offers. To learn more about MoneyScreen and the insights quoted here based on more than 10,000 interviews with U.S. consumers, please contact sales@marumatchbox.com 9

10 ABOUT MONEYSCREEN Innovation in the Payments space is reaching a critical inflection point, where access to mobile, comfort with online (i.e., online banking, online purchasing, online investments etc.) and emergence of new technology and payment options are starting to change consumer habits, behaviors and expectations. MoneyScreen benchmarks and tracks Payment Innovation across all aspects of the industry and provides access to well profiled consumers for on-going concept development and testing. This is a new way for developing your products. Surface unmet needs, evaluate new entrants into the market, optimize your product and fine tune your messaging with unrivaled competitive intelligence at your fingertips. TO LEARN MORE, CONTACT: sales@marumatchbox.com About Maru/Matchbox Maru/Matchbox, a Maru Group company, has been pushing the boundaries of the customer market insights space for over a decade. We combine deep sector expertise with cloud-based customer insights communities, and take a results-focused, consultative approach to helping clients better understand what motivates their customers and influences their markets, so they can act decisively and win. 1 The Global Mobile Report, ComScore 2 US Time Spent with Mobile: A Deep Dive into Mobile App and Web Time, Catherine Boyle emarketer Jan How Mobile Has Changed How People Get Things Done: New Consumer Behavior Data, Lisa Gevelber, Think with Google 4 The age of the appacus, The Economist Feb 25, A Global Perspective of Mobile Commerce, Interactive Advertising Bureau U.K. Consumer Payment Study, TSYS UK Payment Markets, Payments UK 8 UK Mobile Payments: After a Slow Start in a Competitive Space, Some Signs of Progress, Bill Fisher, emarketer Jan 27, Digital wallets in the U.S.: Minding the consumer adoption curve, McKinsey Oct Mobile Wallets: Service Provider Analysis, Market Opportunities & Forecasts, Juniper Research, US Mobile Payments Outlook: Strong Growth Forecast for Proximity, Peer-to-Peer Payments in 2017 and Beyond, Brian Yeager, emarketer November 14, EMV and NFC: U.S. Merchant Implementation Status, 2016, Aite Group 13 NRF/Forrester survey says EMV pushing aside other payment initiatives, National Retail Federation North American Digital Payments Survey, Accenture 15 Digital wallets in the U.S.: Minding the consumer adoption curve, McKinsey Oct