A number of studies regarding the demand for mobile payments — or lack thereof — have hit the headlines recently:
- Harris Interactive: “Only 5% of Americans have scanned their phone for admission to a movie or as an airline ticket, and 3% have done so to pay for clothing or electronics, admission to a concert, live theater or performance, or to pay for a convenience item such as coffee. Just under half of Americans (47%) say they are comfortable using a mobile scan as an admission ticket to movies, concerts or live theater performances.”
- Radius Global Market Research: “The majority of Americans remain quite skeptical of smartphone-generated payment solutions and in the near-term are not likely to give up traditional forms of payment. Security tops the list of concerns about mobile payments. “
I guess mobile payment providers should just pack up and go home and find some other business to pursue, eh?
My take: The lack of demand for mobile payments has multiple causes — some of which are easier to overcome than others.
At the risk of oversimplifying things, the lack of demand for new technology-based services (in financial services, at least) can be attributed to a combination of three factors:
- Lack of supply. This may seem obvious, but it really isn’t. Sometimes, consumers don’t express demand for a service because it isn’t readily available, or they don’t perceive it to be. It’s nice to know that only 5% of Americans have used a mobile device to pay for movie tickets. But the other part of the equation is: How many movie goers have had the opportunity to use a mobile device to pay for tickets?
- Lack of desire. This usually shows up in consumer statements like “I don’t want…” or “I have no need for…” the new technology.
- Lack of trust. Security, fraud, privacy concerns are good examples of the lack of trust in a new technology.
Supply is certainly changing as new mobile payment providers and capabilities come to market, and as retailers and merchants begin to accept mobile payments. The percentage of consumers who use mobile payments — because they already want to, but haven’t been in situations where they can — will rise as a result.
Desire (or lack thereof) is a surmountable barrier. Harris’ surfacing of “lack of comfort” with the technology is hardly a concern in my book. First off, please don’t tell me that today’s Gen Yers (and to a large extent Xers) aren’t comfortable using technology. This “lack of comfort” has to be more prevalent among older consumers who represent a disproportionately lower percentage of overall consumer spending.
Just as important, marketing can help create desire and perceived need. Banks have motivated customers to use online banking and bill payment with offers of cash, and through the connection of “going green” and being more environmentally-conscious. This time around, it isn’t just banks, but retailers as well, who will help create the desire and need for mobile payments. The marketing of mobile payments hasn’t even begun yet.
The best way to overcome the lack of desire, however, is to prove that a new solution is measurably more convenient than the alternatives. If and when mobile payments meets that criteria, the demand for it will radically and rapidly increase.
Trust is the stickier problem. Technology-related security concerns are often hard to overcome. A former colleague of mine (Jaime Punishill, if you must know) used to say “you can’t overcome technology-based security concerns with more technology.”
THE RISE OF THE SMARTPHONATICS
What the naysayers are failing to take into consideration is that: 1) Consumers’ behavior changes, and 2) Consumers are terrible, terrible, terrible predictors of their future behavior. The pessimists aren’t recognizing a segment of consumers that I call Smartphonatics:
Consumers who change their shopping and payment behavior as a result of owning a smartphone.
Despite the proliferation of smartphones in the US, not everyone who owns one is a Smartphonatic. But this group is growing, and their buying power is disproportionately higher than their numbers. They’re mostly young, and relatively affluent (for their age).
Today, Smartphonatics only account for about 7% of the population, but I’ve forecasted that that number will grow to about 20% by 2015. It’s important to keep in mind that Smartphonatics won’t be the only ones making mobile payments — just the ones leading the way for the others.
Bottom line: The current lack of demand for mobile payments is in no way a major concern for the future development of the capability.