While Mobile Wallets Have Gone ‘Mass-Market,” Adoption Has Leveled off

Ever since Apple Inc. raised the profile of mobile wallets with its launch of Apple Pay in 2014, observers have questioned how widely consumers would take up the newfangled payment gadgets. The latest study shows that while adoption is widespread, it has stalled in recent months.

The good news for mobile-payments providers is that “adoption of mobile payments and mobile wallets is mass-market,” notes an article from First Annapolis Consulting, an Annapolis, Md.-based payments-research firm. The article cites research the firm conducted in January, which shows that 85% of consumers under 35 had made a mobile payment in the previous 12 months. At the same time, fully 36% of those older than 65 had also used a mobile wallet.

Indeed, interest in mobile payments “is by no means limited to younger consumers,” says the article, written by First Annapolis researchers Melissa Fox, David Cencula, and Laura Levy.

For the research, First Annapolis surveyed 1,514 U.S. consumers who are 18 or older and have both a smart phone and a banking relationship.

Overall, 40% of respondents had a mobile wallet on their phone and 20% had used one of the so-called Pays, not only Apple Pay but also Android Pay and Samsung Pay, the mobile wallets from Alphabet Inc. and Samsung Electronics Co. Ltd., respectively, that followed Apple Pay’s launch a year later. Fully two-thirds of respondents had made a mobile payment of some kind on a smart phone within the previous 12 months.

But while mobile wallets may now be considered “mass market,” that doesn’t mean usage is routine or even frequent. As the authors point out, just 5% of consumers were using the wallets at least once a week. And adoption itself, while much stronger than it was two years ago, has stalled in recent months. “Adoption of mobile payments increased dramatically over the past 18 months, but did not change significantly over the past six,” says the authors. “This plateau was consistent across all categories of mobile payments, with no significant changes for any particular mobile payment type. Bill payment continues to have the highest penetration, followed by in-app/online purchases.”

Specifically, while the fraction of consumers who had made a mobile payment zoomed from 40% in May of 2015 to 74% in June of 2016, it had increased by just 1 percentage point, to 75%, by January. Fifty-eight percent had used their smart phone to pay a bill, up from 54% in June, but those making in-app or online purchases actually dropped, from 55% to 53%, and those paying in stores likewise dipped, from 23% to 22%.

Still, usage for the Pays is holding up well, the research indicates. Some 31% of Apple Pay users in the study reported using the service at least once a week, up from 24% in June. The same numbers for Android Pay and Samsung Pay users are 24% and 36%, respectively. Some 34% of respondents had signed up for Apple Pay, while 14% had done so for Android Pay and 20% for Samsung Pay.

Those who said they don’t use mobile payments cited security as a top concern, according to the survey. At the same time, respondents who have or want a mobile wallet said they wanted just one app, with 48% indicating they preferred the app came from their bank. “That preference is even more pronounced among non-users, who may not yet have a wallet because they are not comfortable with the options available in the market,” say the authors.

But some merchant apps are nonetheless proving popular. The top merchant wallet, among respondents who reported having one, is that of Starbucks Corp., at 62%, followed by Wal-Mart Stores Inc.’s Walmart Pay (27%), and Dunkin’ Brands Inc.’s Dunkin’ Donuts app (26%).

And, while rewards are often cited as an inducement to usage, some 40% of respondents said rewards were a prerequisite for downloading a mobile-payments app in the first place.

The latest research is part of First Annapolis’s recurring “Study on Mobile Banking & Payments” series.