Warning: Mobile wallets are not turning the payment tide. Yet…
The “Pays” are a hot topic in financial circles these days. But mostly, a lot of questions are swirling around their adoption rate. Of the top three mobile wallets, Apple Pay, Samsung Pay, and Android Pay, which is making the most headway? Are consumers ready to replace their physical wallets with their mobile devices? And, what does it all mean for financial institutions and debit card usage? Let’s take a look.
Mobile wallet adoption vs. usage
Global management consulting firm McKinsey & Company reports that mobile wallets are currently handling about $300 billion in transactions in the U.S. alone, and mobile wallet spending is expected to surpass $1.2 trillion by 2020—approximately one out of every five dollars spent in the U.S. Additionally, PULSE reports that mobile wallet enrollment rates are on the rise—Apple Pay, the most popular of the three big “Pays,” increased 80 percent in 2016.
Taking these numbers on face value, the future looks pretty good for mobile wallets. But there’s more to the story. According to a PULSE report analyzed by BI Intelligence, although mobile wallet enrollment is going up, usage is fairly flat. Apple Pay cards see just 0.6 transactions per card per month; Android Pay sees around 0.7 transactions per card per month; and Samsung Pay sees slightly higher usage, averaging 1.3 transactions per card per month.
So, while projections for the future of mobile payments are huge, the reality is something different—which opens up a huge opportunity for financial institutions to turn the tide.
Obstacles to widespread embracement
What’s preventing mobile wallets from making greater headway in the marketplace? Experts point to myriad factors including security concerns, lack of acceptance among large retailers, and confusion about the acceptance process. Vantiv research into the topic reveals that four out of ten non-mobile users don’t believe mobile wallets are safe; 20 percent don’t use mobile payments because the retailers they shop at don’t accept the payment type; and one in five consumers don’t understand how mobile payments work.
Advantages and opportunities for financial institutions
When it comes to mobile wallets, financial institutions hold three key advantages over the Pays. The first is cardholder trust. While financial institutions have had years to build up consumer confidence, mobile wallets are still proving themselves. According to recent Vantiv surveys, consumers have been with their primary financial service provider for 7.5 years on average, and 73 percent report being highly satisfied with their choice. Furthermore, 75 percent trust that their primary financial institution would resolve a fraud issue in an exceptional manner, and 70 percent are highly likely to recommend their primary financial institution to others.
The third is an established cardholder base, which financial institutions can leverage if they decide to launch their own mobile wallets. Last year, Visa launched a platform to make it easier for financial institutions to develop their own branded mobile wallets. The platform allows financial institutions to introduce mobile payments to their cardholders, and further position themselves as a trusted financial provider.
Although it doesn’t appear that mobile wallets will render financial institutions obsolete anytime soon, it’s worth keeping a close eye on their evolution and adoption. Engaging a trusted payments partner like Vantiv is a good way to stay ahead of the curve with access to mobile wallet insights, tools, and expertise. To find out more, contact us.