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If consumers wanted a mobile wallet in 2013 and 2014, they wanted it from their primary financial institution. But things changed in 2015, when PayPal and Visa surpassed banks and credit unions as preferred wallet providers.
That’s the bad news for financial institutions in a new report about mobile wallets from Javelin Strategy & Research. The good news is that a greater percentage of consumers actually said they wanted a mobile wallet from their primary financial provider in 2015 than in 2014. But preferences for the competition grew faster, according to Daniel Van Dyke, co-author of the “What’s In Your Mobile Wallet” report.
At 63%, PayPal handily won the preference race in 2015, up 21 percentage points from 42% in 2014. Next was Visa at 56%, more than double its 27% preference rating in 2014. In third place was “your primary bank,” at 51%, up 6 points from 45% in 2014. And in fourth place was MasterCard at 48%, up 20 percentage points.
Pleasanton, Calif.-based Javelin asked a random-sample panel of 3,200 consumers in November to rate 10 providers’ wallets, and prospective financial-institution wallets, on a scale of 1 to 5, with 1 meaning not at all likely to adopt and 5 meaning very likely to adopt. The published percentages refer to responses of likely or very likely to adopt.
The other mobile wallets or prospective wallet providers listed, and their respective ratings in 2015 and from a similar Javelin survey in 2014, are: American Express, 37% and 25%; Apple Pay, 34% and 28%; Android Pay, 34% and 31%; Microsoft, 29% and 21%; Starbucks, 27% and 17%; Facebook, 25% and 14%; and MCX/CurrentC, 22% and 16%. Some of the wallets listed did not exist in 2014, although there was considerable publicity in that year about their impending launches.
In a 2013 Javelin survey, primary banks were No. 1 by far, at 43%, with PayPal second at 34%.
A likely reason that consumer preferences for financial-institution wallets grew slowly in 2015 is that there were so few of them during a year dominated by headlines about Apple Pay, Android Pay, and other non-bank wallets as well as enhancements by Visa and MasterCard to their digital offerings.
“When you’re looking at the existing landscape, there aren’t many FIs out there today,” Van Dyke says. “There haven’t been that many FIs willing to make the plunge yet.”
Two prominent current examples are Capital One Financial Corp., a regional bank holding company and big national credit card issuer that has a wallet in the market, and JPMorgan Chase & Co., the nation’s biggest bank, which unveiled plans for its Chase Pay service only last October. Chase Pay is expected to hit the market by mid-year.
“It’s not that FIs aren’t growing,” says Van Dyke, noting their 6-percentage-point growth in consumer preference. “It’s just that they’re not growing as a fast as the other players.”
Van Dyke predicts that financial institutions will soon take on a higher profile in mobile wallets. “There’s still time,” he says, noting that the market is still quite young. But because of the technological and operational complexities in deploying wallets, only a few will become prominent players. “We imagine it’s going to be a game dominated by the top five banks,” he says.
PayPal’s big growth last year didn’t surprise Van Dyke. San Jose, Calif.-based PayPal is the non-card online payments leader and already gets about 25% of its payment volume through mobile channels. Van Dyke says the company’s high rating in the 2015 survey “is partially a function of the breadth of relationships they have as a digital-wallet provider. It’s not a big leap” to mobile.
