It’s Not the Only Factor, But Security Looms Large as Consumers Eye Mobile Payments: Survey

Despite all of the hype about mobile payments, consumer concerns about security, convenience and where they can use smart phones have yet to be addressed, finds a survey from The 451 Group.

Of the more than 4,100 North American consumers polled in December, 84% cited security as the top concern, followed by overall ease of use, 66%, and the availability of merchant locations, 64%.

While security is significant issue, it is largely a matter of perception, says Jordan McKee, an analyst at New York-based 451 Research LLC. “It’s not that mobile payments are inherently insecure,” McKee tells Digital Transactions News. “It’s a matter of messaging. There needs to be strong messaging about the security that mobile payments provide.”

Apple Inc., in particular, has done a good job of promoting the security of its Apple Pay scheme, which uses dynamic tokens and biometric authentication, McKee says. “They differentiated themselves by blending hardware and security,” he says. Apple stands out for its ability to translate complex payment-industry terms into a message that makes sense for consumers, he says.

But even that is not enough for mobile payments to move beyond a narrow group of users. Consumers demand an easy-to-use mobile-payment service and places to use it, he says. Currently, there are an estimated 200,000 merchant locations that accept near-field communication (NFC) contactless mobile payments, such as that used by Apple Pay. Other merchants, such as Starbucks Corp., use bar codes for their mobile-payment systems, which can make them ubiquitous.

NFC-compatible locations are projected to multiply as merchants upgrade their point-of-sale terminals to accept Europay-MasterCard-Visa (EMV) transactions. Many of these POS terminals also are equipped with contactless readers.

Indeed, McKee says anecdotal evidence from independent sales organizationsindicates that mobile-payment schemes like Apple Pay and LevelUp, a payment and marketing service, start off many sales conversations with merchants and act as a way to get the merchant to upgrade to an EMV terminal.

“That’s starting to really show up in a big way,” McKee says. “Apple has really helped this conversation for the ISOs. The momentum is very promising now.”

Mobile payments may gain favor among consumers as a speedier way to pay because EMV chip cards require leaving the card in the reader and waiting to remove it until the payment authorization has been received. This will be a new experience for U.S. cardholders, McKee says. A mobile payment may be quicker. “There’s an opportunity for the card brands, for other stakeholders, to stress the message around mobile payments,” he says.

McKee says success in mobile payments requires resolving these issues for consumers before moving on to value-added services, such as loyalty and rewards programs, which can be catalysts for further adoption. “It’s the eye candy that makes shopping exciting,” McKee says of value-added services.

One other impediment to mobile-payment adoption is that many consumers—47%—are satisfied with existing payment mechanisms. “What we have today actually works quite well,” McKee says. “The next step in this journey is creating mobile-payment messages that are more exciting than what we have today.”