Remember the Pays?

The hype around Apple Pay, Samsung Pay, and Google Pay has quieted considerably. But that doesn’t mean the three big wallets are sitting still.

When the so-called Pay wallets—Apple Pay, Samsung Pay, and Google Pay—launched in 2014, 2015 and 2018, respectively, they did so to great fanfare. At the time, the expectation was that these mobile wallets could potentially make traditional card-based payments obsolete.

Mobile wallets were considered groundbreaking payment technology because they gave consumers tap-and-go payment capability through their smart phones, which greatly reduced friction at the point-of-sale. That convenience, along with the weight and consumer awareness of the Apple, Samsung, and Google brands, made the ceiling for the Pays seem unlimited.

In the intervening years, much of the marketing hype around the Pays has died down and consumer adoption has been sluggish.

In 2016, for example, adoption among consumers eligible to use a Pay wallet, i.e., consumers with an iPhone or Android phone, was 27%, according to payment consultancy Auriemma Group Inc. Fast forward to late 2021, and that figure jumps to 44%; respectable growth, but still less than half of eligible users.

Another indicator of the Pays’ struggles to gain traction is the low percentage of consumers linking a credit card to one of them. That figure held flat at 15% in 2016 and 2017, then dropped to 14% in 2018, according to Phoenix Marketing International, which tracks the wallets.

In 2019, that percentage jumped to 18%, and then to 26% in 2020, when the Covid-19 pandemic accelerated consumer adoption of contactless payments. Nevertheless, indications are that growth is flattening again, with 27% of consumers having a credit card linked to one of the Pay wallets through the first half of the year.

Even Apple Pay, the largest of the Pays with 43.9 million users, according to research firm Insider Intelligence, has followed a similar trend line when it comes to consumers linking a card. From 2016 to 2018, that percentage of consumers held steady at 10%, then climbed to 12% in 2019. In 2020, the figure jumped to 16%, then leveled off at 17% during the first half of 2021, according to Phoenix Marketing.

Again, the figures, while respectable, are not world beaters, payments experts say. If nothing else, they are an indication the Pays have not accomplished what they and many observers expected terms of adoption and usage.

“A lot of mistakes were made by the Pays when they launched, including a stretched adoption curve [and] technical and acceptance problems. And when they didn’t spark like initially thought, the marketing fervor around them ceased and there was no real backup plan [to reignite them],” says Leon Majors, senior vice president, payments systems practice, at Phoenix Marketing.

‘Fully Integrated’

That’s on the negative side of the ledger. While the wallets may not have met their initial lofty expectations for adoption, payment experts say they remain a force to be reckoned with. They cite two primary reasons.

First, the Pays are extremely popular among Millennials and Gen Zers, which consider it easier to pay with a mobile wallet than with a physical card. Indeed, more than 36% of the population of the United States, ages 14 and up, have made at least one mobile proximity transaction in the last six months, according to Insider Intelligence. By 2025, that figure is projected to rise to 43.7%.

“Millennials and Gen Zers make up 68% of mobile proximity payments, and their use of the technology is great news for the future [of the Pay wallets],” says Jaime Toplin, a senior research analyst for Insider Intelligence.

The second reason is that Pay users have shown a preference for using their wallets online, as opposed to in-store. That’s encouraging, as e-commerce sales have rocketed since the Covid-19 pandemic hit and show no signs of a slowdown nearly two years into the health crisis.

A big reason for why the Pays are getting used more for online purchases is that “in a lot of cases these wallets are fully integrated in the user journeys for respective app stores, or they are integrated as one-click checkout options in-app, which makes them more convenient than other methods,” says Nick Maynard, head of research for Juniper Research.

To be sure, the Pays still face many challenges when it comes to broadening consumer adoption beyond online usage and their popularity among Millennials and Gen Zers. If the Pays are to become truly ubiquitous, especially outside their core audience, they will need to find ways to attract new users and increase daily usage, payments experts say.

“With the exception of Millennials and Gen Zers, a large percentage of consumers don’t see the value of migrating to a mobile wallet, especially with contactless cards more widely available,” says Thad Peterson, strategic advisor, retail banking and payments at Boston-based consultancy Aite-Novarica Group.

‘A Holistic Approach’

The Pays are on that case. To attract new users, Apple Pay and Google Pay have focused on adding non-payment adjacent features to raise awareness of their respective wallets among consumers.

Apple Pay, for example has positioned itself as a place where users can digitally store identification cards, such as driver’s licenses and vaccination, loyalty, and membership cards, even boarding passes.

“It’s a move that creates a gateway to using the wallet for people that don’t necessarily think of using it for payment,” says Jaclyn Holmes, director of research at the Auriemma Group. “People have shown they like that feature, and if they have a good experience with it, it helps hook users.”

Google Pay has taken a different approach, focusing on helping users manage their finances and spending through the wallet, as opposed to using it strictly as a payment vehicle. That revamp began in late 2020 when Google Pay parent Alphabet Inc. announced plans to add new features intended to increase daily usage.

The plan calls for Google Pay users to have the ability to pay for, and split, purchases between users, see past transactions, and find offers and loyalty information, all of which can be organized around conversations with other users, former Google general manager and vice president Caesar Sengupta said in a blog post at the time. In April, Sengupta left Google after nearly 15 years to pursue entrepreneurial opportunities.

Despite Sengupta’s departure, Google has remained on track for introducing new enhancements to Google Pay. “This spring we introduced new features which help users find the latest grocery deals, quickly search their spending by category or business, and a way to send money to friends and family abroad in India and Singapore, thanks to an integration with Wise and Western Union,” says Josh Woodward, Google Pay’s senior director of product management.

More enhancements are planned for the coming year. Starting in 2022, Google Pay users will reportedly be able to access Groupon deals through their wallet.

“There’s a need for a new, mobile money experience for people who have grown up in a mobile-first environment, where everything from hailing a cab to opening a bank account can be done with simple taps on a mobile device … so with the new Google Pay app, we took a holistic approach to money by allowing [users] to manage all [their] finances in one place,” Woodward says.

One aspect of the Google Pay revamp that won’t come to fruition is the wallet’s plans to offer bank accounts through its Plex service. Google announced in October it was abandoning that initiative. The plan had called for Google Pay users to have access to their checking and savings accounts, and eventually a debit card, as well as set savings goals.

In a prepared statement, Alphabet said that, while there was demand for simple, seamless, and secure digital payments for online and in-store transactions, the company was “updating its approach to focus primarily on delivering digital enablement for banks and other financial services providers rather than us serving as the provider of these services.

“We strongly believe that this is the best way for Google to help consumers gain better access to financial services and to help the financial services ecosystem connect more deeply with their customers in a digital environment.”

Some payment experts view the move as an indication Google Pay is struggling to bring to market the kinds of financial tools that can expand its user base that Apple Pay and Samsung Pay have deployed with their users.

“It is a sign that Google is struggling to expand Google Pay in the same way that Apple has expanded Apple Pay with Apple Card, which is not highly positive in a competitive context,” Maynard says.

‘A Value Add’

Apple Inc., on the other hand, has closely tied the Apple Card, which debuted in 2019, to its wallet. Apple Pay users can apply for the card in wallet and, upon approval, receive a virtual card for use online and in-store wherever Apple Pay is accepted. A physical version of the card is also available.

One of the card’s perks is that Apple Pay users can search transaction data and see payment summaries through their wallet. “Offering a digital version of the card that enables Apple Pay users to see all their transaction data is a smart strategy, and like most Apple products, the virtual card provides a clean user experience,” says Auriemma’s Group’s Holmes.

Samsung Pay, which is the smallest of the Pay wallets with 16.3 million users, according to Insider Intelligence, in 2020 debuted Samsung Money by SoFi. Samsung Money is a mobile-first money-management app that brings a cash-management account, an accompanying Mastercard debit card, and a string of other benefits to Samsung Pay users.

“Moving into banking services is a value-add that will get people to try the Pays when payments alone are not enough to attract them,” Holmes says.

One potential misstep Samsung may have made with its wallet is eliminating, as of year-end 2020, the opportunity for Samsung Pay users to earn reward points for purchases when using their wallet. Samsung Pay users enrolled in Samsung’s rewards programs can still earn points when purchasing products at Samsung.com, the Galaxy Store, the Shop app, or other Samsung services and applications, just not when using their Pay wallet.

But it’s still not clear what impact the move has had on usage of Samsung Pay in general, payments experts say.

Get More Aggressive

Looking ahead, if the Pays are to increase adoption and daily usage, observers say they need to get more aggressive when it comes to offering consumer incentives.

Such efforts could include working with merchants to create offers targeted to individual wallet users, providing more spending insights, and integrating more payment options, such as buy now pay later. Offering more loyalty applications could also be a winner, observers say.

“The advantage of the Pays is they can bring online capabilities to the point-of-sale, [along with] real-time rewards, and transaction data,” says Greg Weed, director of Card Performance for Phoenix Marketing. “That’s what wallet users find appealing.”