U.S. Consumers’ Coolness to Mobile Spurs Payments Execs to Ponder Causes

Mobile payments in the United States haven’t grown as fast as program sponsors had thought they would, and now the industry is looking at what the reasons might be.

After all, the payment method is positioned to consumers as a faster, easier, more secure alternative to cards, and one that comes with a powerful app that can perform useful non-payment functions like rewards redemption. Yet U.S. cardholders have been cool to mobile payments, despite the popularity of mobile devices.

A panel of mobile-payment executives on Monday said part of the trouble lies in the fact that, while mobile payments are safer than plastic card payments, that fact isn’t clear to users. Investments the card networks have made in tokenization to mask actual card credentials, for example, have largely escaped notice, said the panelists, who spoke at the annual Money 20/20 financial-technology conference in Las Vegas.

“That tokenization scheme the networks erected, while it’s secure, it’s invisible to the consumer,” Tom Poole, senior vice president for digital payments and identity at Capital One Financial Corp., told Digital Transactions News after the discussion. That makes it hard for mobile-payments sponsors to build usage based on concerns stemming from data breaches like the recent hack at credit-reporting giant Equifax Inc.

Also, the checkout-speed advantage mobile sponsors counted on in the wake of the EMV rollout hasn’t converted people to mobile usage, Poole adds. “We didn’t see that happen,” he says. “It didn’t turn out to be the long pole in the tent.” Many issuers, as well as the card networks and industry observers, had figured consumers would turn to mobile as chip card transactions bogged down retail checkouts. The U.S. EMV rollout began in earnest in the fall of 2015.

Yet mobile payments are thriving abroad. Wal-Mart’s stores in China are seeing 2.6 times more mobile-based purchases than card-based, Karla Allen, senior director for mobile wallets at Wal-Mart Stores Inc., told the panel. “The growth there has been outstanding,” she said during the panel discussion. “I keep thinking the growth there is going to slow down and it hasn’t.”

Wal-Mart last year introduced a proprietary mobile wallet called Walmart Pay for Walmart-branded stores. For its Sam’s Club warehouse outlets, it has introduced a mobile program called Scan & Go, which lets users scan their goods before going to the checkout line.

Capital One’s Poole argued the fragmentation of the U.S. market might help explain why mobile payments have been slower to develop. “It’s striking to me how many differences there are” with other countries, he told the panel. “We have 6,000 banks, with lots of community banks and lots of [consumer] affinity for community banks. There’s merchant fragmentation and payments-provider fragmentation.” In the long run, he argued, this is a positive characteristic of the market, but it will prevent the emergence in the U.S. of a dominant wallet like China’s WeChat Pay.

Still, the panel pointed to signs of encouragement. “We’re starting to see pockets [of mass adoption],” said Spencer Spinnell, director of emerging platforms for Alphabet Inc.’s Google unit. The key, he said, is functionality in the app that makes shopping and rewards easier, such as alerts when the user is “proximate to a retailer where I have points accrued.”

And Wal-Mart’s Allen said Scan & Go is growing fast. Usage has doubled in the past year, she said, while 80% of Sam’s Club shoppers who used it used it again within 90 days.