Consumers Warm up to Wallets

In the past 12 months, 51% of consumers purchased a physical good using a mobile phone, the highest percentage in five years, potentially signaling a greater propensity for consumer adoption of mobile payments, according to a new report from Javelin Strategy & Research.

That’s up from 45% in 2013. In 2009, only 14% of consumers had made a mobile purchase of a physical good, the report finds.

“Consumers are ready to use their mobile phones for purchasing,” says Mary Monahan, executive vice president and research director for mobile at Pleasanton, Calif.-based Javelin. “They’re already trying to do it.”

As more consumers adopt mobile phones and use them for banking services, it is plausible that making a payment would be part of the behavior, too, Monahan says.

Consumers want to use their phones in stores, but are stymied by a point-of-sale infrastructure bereft of contactless payment readers, she says. Estimates peg the number of U.S. merchants that accept credit and debit cards at up to 8 million, but only 220,000 merchant locations are said to be equipped for contactless payments.

That technology may get a boost from the advent of Apple Pay, Apple Inc.’s mobile-payment and commerce scheme. “With Apple Pay, consumers have a way to pay that’s very easy,” Monahan says.

Javelin not only expects the volume of mobile payments to grow, but to grow faster than overall POS payments volume. In 2015, mobile transaction volume is forecast to grow to $7.3 billion, reaching $53.1 billion in 2019. Mobile payments will go from an expected 0.18% of overall POS purchase volume to 1.24% by 2019.

Monahan also asked consumers about their favorite mobile wallets, where they store and manage their payment credentials.

At the top is PayPal Inc., which 42% of survey respondents said they were likely to use. “PayPal will be interesting to watch,” Monahan says. EBay Inc. is spinning PayPal into a separate company in 2015. But Apple Pay, which went live just two months ago, already ranks third.

What’s interesting about the top mobile-wallet providers is how they approach trust, innovation, and privacy protection, she says. “Normally, those are factors akin to banks,” she says. “Over time, consumers are developing more trust in these institutions.”

In PayPal’s case, it has bought a number of companies, like Braintree, that extend its reach and add new ways to pay, while cementing deals, as with Discover Financial Services, to expand in-store acceptance locations, she says, adding, “PayPal is a really popular brand among consumers.”

—Kevin Woodward