The retail industry has been a-buzz on the subject of mobile payments for the past three years, but so far consumer adoption has been minimal. Ironically, the form of mobile payments that has been adopted, Square, suffering from classic start-up cash burn problems, has reportedly looked for a buyer with deeper pockets. All this begs the question: Will mobile payments become dominant or will they remain a niche market? And secondly, is it generational inertia that holds back adoption? Will Millennials be the major adopters?
My partner Brian Kilcourse is fond of saying that to be adopted, a technology has to be easier to use than it is to ignore. Do mobile payment technologies meet that criterion?
In the case of Square the answer is easy – it is way easier to use it than to ignore it, no matter how old you are. Retailers (most notably small ones) and consumers alike appreciate it. The small retailer can accept credit cards for a reasonable fee. Sign up for Square, which comes with a card-swiping attachment for a mobile device (called a ‘dongle’ in industry parlance), and customers can sign on the screen and receive receipts via text or email. For the shopper, the opportunity to avoid carrying lots of cash is great. I know I enjoy supporting local businesses, but I rarely carry much cash. Square gives me the ability to buy on impulse wherever I might be.
Starbucks has had success with its mobile payment app which is tied to its loyalty program. The company also allows customers to pay with Square. Consumers like it.
From there the picture starts to get muddy. I’ve gone on record saying I thought PayPal would be a big winner in this space. My logic seemed pretty unassailable. I like the idea that I don’t have to take anything out of my purse, because I can just enter my phone number and PIN on a keypad. But it turns out that it doesn’t pass “The Kilcourse Test.” Unlike the world of eCommerce, where it’s definitely easier to use than to ignore, in the store it’s just easier to ignore than to use. I go to Home Depot with the best intentions…and I forget to select PayPal as my method of payment every time. I just reflexively pull out the credit card. Do I suffer for this? Not the slightest. Apparently I’m not alone. Anecdotal reports tell us PayPal is an infinitesimal part of Home Depot’s in-store business. Is that because Millennials haven’t hit home improvement age yet? Maybe their habits are just different.
But what about the other forms of mobile payment? What’s the future look like for the ones using Near Field Communications (NFC) or Bluetooth Low Energy (BLE)? Will Millennials be the savior for these technologies? So far, the data is saying “Not so much.” There are countries where consumers see mobile payments in their future, but in the US and other places, the picture’s not so bright.
Cash management tech vendor Balance Innovations conducted a study of consumers in the United States via 210 Analytics, LLC. They polled 2,503 college students April 8-13, 2014. The responses were surprising, even to Balance Innovations. They asked: “If widely available, would you use your mobile phone over credit/debit cards to make in-store payments?” The results? Only 16 percent reported they would us mobile payments all the time, 42 percent said they would use it somewhat more, depending on the retailer or purchase, and fully 28 percent said they would not make more mobile payments at all. Those results certainly don’t bode well for the mobile payment industry. “Somewhat” is not a ringing endorsement.
Separately, RSR Research (my company) conducted a study during the 2013 holiday season asking a similar question: “In five years, how do you think you will pay for items when you shop?” Respondents were invited to check all types of payment that apply. Only 22.1% of 190 US respondents between the ages of 18-29 selected mobile payments as one of their choices. That was actually slightly less than the overall US average (1,252 respondents) of 23.7%.
The story changes significantly when we look at different geographies. The RSR study also included approximately 1,000 respondents each from Canada, the UK, Australia, Brazil, Germany, Russia and Japan. While the UK, Canada and Australia responses mimicked the US, and Japan reported very little interest at 12%, Brazil, Germany and Russia showed the most interest, with 59, 42 and 48 percent responding that they expected to use mobile payments.
I know the results from Japan are counter-intuitive. Visitors report something to the effect of “mobile payment capabilities are everywhere in Japan.” That may be so, but apparently not too many people are actually using those capabilities. Somehow they’re not passing “The Kilcourse Test.”
So it appears that all the hoopla aside, in-store mobile payments are not going to be a defining trend, regardless of age. Personally, I’m really rooting for technologies like Square. I am so cash-adverse that it’s hard to even buy a taco from a food truck if they don’t take credit cards of some sort. It’s hard for me to change my ways. But then, I’m not a Millennial. Still, apparently, they’re not all that keen to change their ways either. In the US at least, mobile payments are just not a happening thing.