So, Where’s the User?

The Gimlet Eye

Mobility’s importance in payments these days grows apace. No sooner were we getting used to paying in-app and in-store on smart phones than so-called wearables came along with payments capability built in. Apple began shipping its smart watch last month with Apple Pay functionality, and American Express has teamed up with Jawbone, a maker of fitness bands, to add payments to those devices.

But lost in all this excitement is one crucial question: Will the consumer—the user, in today’s mobile parlance—show up for smart-phone payments, let alone wearables payments?

There’s room for doubt. Lots of room. Cards bearing magnetic stripes may eventually be replaced by chip cards (look for total replacement to take years, possibly a decade), but these devices will still be cards. And consumers are quite comfortable using cards for payments, especially if they can be reassured about security. Storefront merchants everywhere accept cards, they can be used online and in-app, and the process is well-rehearsed, though admittedly a bit clunkier with EMV chip cards.

Who accepts mobile payments? The list is growing but it remains much too short to encourage and reinforce habitual usage among consumers. In stores, the list will grow longer with the advent of EMV terminals, but it remains an open question how many of these merchants will switch on the contactless function to receive tokens from phones—or watches.

In this month’s issue, we present our 7th Annual Field Guide to Alternative Payments, which is dominated by mobile. Just about every one of its 38 entries relies in whole or in part on a mobile solution. And long-time payments observer Steve Mott gives us a close-up look at the strengths and weaknesses of the big tech firms that are bidding fair to take over mobile payments.

But that nagging question lingers: will the consumer show up? A Federal Reserve survey fielded in December shows that 22% of consumers who own a mobile device had performed a payment with it at least once within the prior 12 months. That’s nearly double the proportion in 2011. But the survey also asked the much larger group of non-users why they don’t do mobile payments. Three-quarters said cards and cash are easier. Fifty-nine percent said they see no benefit. An equal number fretted about security.

And the kicker? Nearly two-thirds of these non-users said they’d never do mobile payments, regardless of offers or rewards. Forget phones. What does that say about the future of wearables commerce?

Not to be a pessimist, but it seems something needs to change. Next month, we’ll have a look at what that might be.

— John Stewart, Editor john@digitaltransactions.net