Is the Mobile Payment Tipping-point Approaching in the US?
If recent surveys regarding mobile wallet use are accurate, the mobile payment boom is about to happen. The next two years could see a rapid adoption of mobile wallets among credit card holders, causing a paradigm shift in the way we make purchases offline and online.
20% of US Customers Are “Likely” to Load Their Credit Card into a Mobile Wallet
According to Business Insider’s Intelligence Unit the potential number of adopters of mobile wallets in the United States, among consumers with credit cards, is growing fast. The survey measured credit card holders’ negative and positive intent to store their credit card information into a mobile wallet as “Not Likely” or “Neutral,” and “Likely” or “Definitely” respectively. They also measured the number of people who “Already Have” stored credit card information into a mobile wallet.
If this data holds true, it’s likely we are on the precipice (FINALLY!) for a mobile payments boom in the United States.
Scenarios for a Mobile Payment Boom
Scenario One: Entrenched Laggards, Constant Growth of Positive Intent
My first impression from this chart by BI Intelligence was that there is a wave of mobile payment adoption coming among credit card holders. However, we need to make some assumptions to see how rapidly this wave is approaching. First, let’s try to get a grasp on the situation.
Key Assumptions:
- 33% of respondents who say they are “definitely” going to load their credit card DO
- 33% of respondents who say they are “likely” to load their credit card DO
- People with negative intent (“Not Likely” or “Neutral”) will remain fixed
- YoY Growth for positive intent will remain constant
In this What-if scenario, we can clearly see that the number of people planning to store credit card information in 2017 will likely increase at a faster rate than previous years. At a constant rate of YoY growth in positive intent only 95% of the population is represented. It is also likely the laggards will continue to decrease over time though we have kept them constant in this scenario.
Furthermore, if we reduce the number of people with positive intent who actually load their credit card -- conversion -- from one in three (33%), the growth rate for people who are “Likely” or “Definitely” going to use a mobile wallet must increase even more dramatically.
Scenario Two: Laggard Floor, Moderate Conversion
Let’s modify our key assumptions to create a scenario where we have a moderate conversion from intent to action and growth in positive intent, but a similar distribution of responses over time.
However, let’s also assume there is a floor for laggards who show negative intent.
Key Assumptions:
- 33% of respondents who say they are “definitely” going to load their credit card DO
- 20% of respondents who say they are “likely” to load their credit card DO
- The sum of negative intent (“Not Likely” or “Neutral”) cannot be less than 16%
In this scenario we get a picture that’s more believable. We see a spike in positive intent next year, and have adjusted the growth of positive intent moving forward so we get a similar distribution among “Likely” and “Definitely” reponses. At the same time, assuming a moderate conversion rate (one in five, and one in three respondents respectively) among people with positive intent, we see a nice growth curve among those who “Already Have” stored their credit card information into a mobile wallet.
Among those consumers who have already stored their credit card into a mobile wallet, how many do we think have transacted? In general we see a drop in retention of 33% for any major step along an experience. That leaves us at 66% of people who stored a credit card on a mobile wallet, transact with a mobile wallet; which is about what we would expect based on media reports on Apple, Android, and Samsung Pay use among consumers who can use the service.
Does this seem like an aggressive forecast? Not really. If this is correct, it puts consumers transacting with a credit card via a mobile wallet around 30% in 2019.
In other words, half way through the Early Majority stage on the Diffusion of Innovation scale.
Does this mean my Mobile Wallet is about to be really successful?
It’s unclear what success means, but certainly it means a paradigm shift in the way people transact in less than five years. There are many companies banking on this shift, hence the options for consumers are growing as the market is becoming more fragmented.
Currently, most players measure success by number of registered cards, number of transactions, and the value of those transactions. However, profitability for mobile wallets is something still in the future, though certainly that future is less distant today.
How long can you stick in the fight?
Many traditional financial institutions will continue to see their mobile wallet as a value-added service, while customers who are over-served by those institutions will adopt alternatives with superb mobile experiences. Eventually, those alternatives are likely to move up-market taking away more of the retail banking market from traditional financial institutions.
Are you focusing on a superb mobile experience?
Of course, your payment service is worthless without acceptance. It is essential to have great retail partners who are part of the daily lives of your target audience. And while acceptance is key, so is awareness of your mobile wallet.
Most iPhone 7 users who have a credit card stored on Apple Pay fail to use it because they simply forget it is an option or they don’t know it is. Of course, universal acceptance would resolve this… but until you can get that (please don’t hold your breath) making sure your customers know where your mobile wallet is accepted is critical.
Combining these two critical factors, Acceptance and Awareness, into a superb mobile experience will mean you have a shot at catching onto and riding that wave of mobile wallet adoption.
Can you monetize enough?
The question still remains, how can you monetize your mobile wallet even with a wave of new customers? The recipe for success in consumer-facing mobile payments is still unclear.
There is a plethora of business models and new technologies being experimented with all the time by dozens of players across the payments value chain. Many of these are designed to reduce cost and generate income from that savings, others are designed to create more value by offering discounts or loyalty rewards, while others promise a faster checkout, or try to provide instant settlement.
The list of players is long and diverse. In nearly every country in the world there are several mobile payments players including banks, startups, telcos, retailers, and OEMS. There is a different recipe for each of them.
Ultimately the winners in each market will be those services which can combine Acceptance and Awareness, with a Superb Experience, and a unique Business Model which leverages New Technologies that address cost and speed. I wouldn’t call that a recipe, but perhaps you can call it an outline.
Ditching Our Wallets for Mobile
I’ve been a fan of brick-and-mobile for years, and looks like the competition to win that space is getting more interesting. Paypal, Amazon and Google, have all been making major strides toward mobile payments. Apple is expected to make announcements soon, with rumors flying about NFC support and a new mobile wallet. Apple has also been working with Qualcomm’s Gimbal to deploy a BLE platform reportedly for brick-and-mobile commerce.
SK Telecom’s own subsidiary SK Planet --disclaimer, this is where I work-- has also entered the fray with the new Slyde app in the USA and Syrup in South Korea. Both of these are using a mix of awesome proprietary BLE technology, and in Korea Syrup is using NFC (which is an old hat in Korea, I could live with just NFC here if I tried) as well.
Amazon’s Buzz Kill
Jeff Bezos is faltering… at least for now. The fire phone (or whatever) is terrible, even if it wasn’t a blatant maneuver to get consumers to buy even more on Amazon. This mobile play is accompanied by a new Amazon Wallet, which is available for Android devices and let’s people upload gift cards to manage their stored-value payment arsenal. Nice move by Amazon, but seems like many consumers are peeved that Bezos Co. keeps coming after their personal information en force. Several people can be seen complaining about Amazon on various forums, and they are not alone.
Even Walmart is annoyed at Amazon. Perceiving the Kindle Fire as a “trojan horse” the company hasn’t been selling them... apparently since 2012. And given Amazon’s history the new mobile wallet could get a reputation for using payment and gift card purchase history in order to… yup, get you to buy more recommended stuff on Amazon products.
Google Wallet Lackluster
I like Google Wallet and there is a lot of potential there, but so far it is lackluster. However, the super-tech-star is really smart about their payment rep. Unlike Amazon, Google is positioning their payment solution along-side all the others… including Carrier Billing, and now PayPal.
While there isn't a lot of talk about Android and BLE in the US (Apple gets most of the coverage it seems), Android and NFC go together like peas in a pod. And if South Korea is any indication adoption will accelerate soon. A host of devices have NFC support, so it is really a matter of time before enough retailers have an NFC enabled POS in the US.
Apple Bites...
…on some of that smartphone market share. Or that would be my prediction for 2015. I think it is likely Apple is going to nail mobile payments in the next year and that the superior experience could lead to a slight bump in market share. Despite the naysayers, if Apple nails the mobile wallet… yeah a lot of people are gonna want it.
With the rumored introduction of NFC and the rolling-out of a massive BLE network with partners such as Qualcomm and a host of retailer partners we could see Apple pave the way for real mobile wallet adoption in the USA.
SK Planet
A fairly large player in Korea, and lot’s of experience in commerce here, SK Planet is making a mobile commerce push into the US. Though the combined population of Los Angeles and the Bay Area would probably be about the same as the population of South Korea… that doesn't mean you can ignore it. NFC payments and smart chips in credit cards are old hats here (to the tone of at least 8 years) while neither technology has real traction in the US. After years as part of SK Telecom, and the fact that everyone who works here uses NFC and smart-chip credit cards everyday (as does just about everyone in Korea), I believe what the company lacks in market presence it can make up with experience.
Currently in beta, SK Planet's US affiliate's mobile wallet, the new Slyde app (www.slydenow.com), could be more broadly available later this year. In Korea the Syrup app (previously called Smart Wallet) just launched BLE enabled services in limited locations near Seoul, adding to the already successful loyalty card wallet and coupon clipping features available since June this year.
Haters Gonna Hate
There are still lot’s of naysayers who believe the traditional wallet will not be replaced by the mobile wallets. They all seem to be in the USA, while almost anyone in Korea agrees that it is just a matter of time. That’s because of two realities here: smartphone penetration, and nearly ubiquitous NFC payment options.
Naysayers claim that cash is available everywhere and that mobile wallets on smartphones “haven’t even come close” to the same level of acceptance. That may be true in the US, but consider that in Korea smartphones enjoy 90% penetration and 100% of people riding the subway are using NFC payment already. Not to mention probably 100% of young consumers are using either T-Money, Cashbee, or some other method of NFC payment at a host of places everyday.
In fact the problem isn’t getting people to move from cash, the problem is getting people to move to an app when they already have a card or phone or both that is enabled via smart-chip or NFC to make payments just about anywhere. So enough with the C.R.E.A.M. defense against mobile wallets. If Korea is any indication of a mature "mobile" economy, and arguably it is more so that the US, the future is bright for mobile wallets.
Personally, once a mobile wallet app is ready which truly makes my credit cards go away, my wallet is going in the trash. We are getting closer every day to when we only need our phones, and I can’t wait. It’s so close that the last time I went to the airport I consciously decided not to buy a wallet, because I knew it would be outdated soon.
