Barriers to use of Mobile Payments

People today are using mobile devices for almost every area of their lives spanning the personal to the professional. Mobile technology has enhanced communications and productivity, making it easier for people to stay connected to their family, friends, and coworkers. Business applications for mobile tech have only just begun to infiltrate consumers’ everyday goings-on—and changes are happening quickly. More people are picking up their tablets and smartphones to log retail loyalty points, check bank account balances, pay credit card bills, share product reviews, and make online purchases for anything from movie tickets to athletic shoes.

But are people taking their mobile devices to the register? According to a survey conducted by the U.S. Federal Reserve in December 2014 and reported in Consumers and Mobile Financial Services 2015, the answer is “yes.” Mobile phones are changing the way consumers make payments. Consider these statistics:

• 39% of all mobile payment users with smartphones have made point-of-sale payment using their phone in the 12 months—in line with the 39% reporting such payments in 2013. Of these users,
• 31% scanned a barcode or QR code displayed on their phone’s screen (down from 39% in 2013)
• 22% used an app that did not require tapping their mobile phone or scanning a barcode (up from 17% in 2013)

This data shows that while the number of people making mobile payments at the register didn’t increase between 2013 and 2014, the way they made the transaction shifted. Payments technology is changing, and both consumers and businesses are in the process of wrapping their arms around the “best way” or the “preferred way” to make a payment. Through a payment platform like Apple Pay or a proprietary application, like Starbucks’ mobile app? Through a scanning device or card reader? There isn’t a standard technology used to facilitate payments, so stakeholders are still experimenting with what is going to meet both consumer and business needs.

While this might be reason enough to keep some people’s phones away from the cash register, let’s consider the other potential barriers to their adoption of point-of-sale mobile payments:

• Outstanding Security Concerns – Consumers are wary of putting their financial information at risk. They hear about retail-based data theft and privacy breaches on the news, and they aren’t necessarily confident that emerging technology will keep their money safe. Retailers, in turn, are taking precautions to ensure transaction and identity security at their mobile-enabled registers.
• User Value Propositions – People need a reason to pull out their device to make a payment. They have been using cash, checks, and credit cards successfully—so why make a change that requires learning a new process? This is the question retailers are eagerly exploring, and there isn’t a one-size-fits-all answer. Some are promoting the mobile payments through convenience angle, but many retailers are finding some success through mobile-based loyalty programs (read more about this trend in Customer Loyalty Programs Sweeten the Mobile Payment Value Proposition).
• Demographics – While mobile payment use is by no means limited to tech-savvy Millennials, there are general demographic variances that can’t be ignored. Peoples’ comfort with technology and willingness to change their behavior is certainly affected by their age and experience level. Younger consumers are likely the earliest adopters of mobile payments technology, but their older counterparts are catching up. That means that over time, the number of people using mobile payments will represent every generation.
• Device Hardware & Software Capabilities – Not all mobile devices come standard with mobile payment-enabled functionality, and technology isn’t always failsafe. Making a successful payment depends on having the right technology in place. Users may need to upgrade their device and/or download software required to make at-register payments. Then, the user interface needs to be intuitive enough to take them through the transaction—and their devices need to connect or communicate with the retailer’s system.
• Merchant Acceptance – Even if a consumer is ready and willing to make a point-of-sale mobile payment, the store they’re shopping at might not be set up for mobile payment transactions. This is a factor retailers need to consider carefully if they’re waiting on consumer demand to drive their mobile payments strategy.

For further insights:

Understanding Consumer Adoption Drivers: Insights from The McKinsey Global Mobile Payments Consumer Survey