“Despite much publicity upon launch, the Pays (Apple, Samsung, Android) have struggled to gain traction,” concludes a Goldman Sachs report. “Mobile wallet adoption has been underwhelming by nearly every standard, including initial penetration and repeat usage rate.”
Another study by two Indonesian researchers suggests why, and provides clues to what both financial institutions and merchants should do about it.
Innovation Decision Stages
Everett Rogers, a professor of communication studies, popularized the theory of “innovation diffusion” in a book published in 1962 (even before Gen Xers were born, dispelling Millennials’ conventional wisdom that their generation invented “innovation”). In Diffusion of Innovations, Rogers postulated that diffusion occurs through a five-step decision-making process:
- Knowledge – Exposure to an innovation’s existence and how it works.
- Persuasion – Formation of a favorable or unfavorable attitude towards innovation
- Decision – Engagement in activities that lead to adoption/rejection of innovation
- Implementation – Putting the innovation to use
- Confirmation – Seeking reinforcement of the decision to use the innovation
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Mobile Payment Adoption
According to the Indonesian research, mobile payment adoption can be mapped to Rogers’ process:
1) Knowledge. Participants in the study relied heavily on websites, social media, and family/friends to learn about mobile payments. Information and referrals were often as likely to convince study participants to not use mobile payments as they were to use them. Comments from participants included:
“My sister used it some time ago and she told me that she had a bad experience. She convinced me not to use a mobile wallet.”
“I heard that people had successfully hacked the security of a wallet and stole the accounts database. It appears that the database is sold on the Internet.”
2) Persuasion. While other studies, and even ads from mobile wallet providers, point to the convenience of making payments with a mobile phone as a key benefit, the Indonesian researchers found that rewards were a more important factor persuading someone to adopt mobile payments:
“The rewards offered become the most appealing factor to me. I could buy a cinema ticket or food from particular merchants with special prices.”
The lack of, or inappropriateness of, rewards also played a factor in the persuasion stage:
“The discounts only apply to limited products.”
“The promotions offered were interesting, but were not available where I live.”
3) Decision. In real life, some consumers will choose to not use mobile payments after going through the persuasion stage. In the study, however, participants were required to do so, and according to the researchers, they chose the mobile wallet whose rewards and promotions fit the participants’ lifestyle, provided simple terms and conditions, and were available where they lived.
4) Implementation. Having made a decision to make mobile payments, solidifying the behavior is dependent upon the quality of the experience. Having failed this test, some study participants bailed out of using mobile payments:
“I tried a couple of times to use my mobile payment account, but I kept failing.”
“I ordered some food through the app and intended to pay with mobile payment, but I kept getting an error and the screen showed nothing.”
“I bought food in a restaurant that was mentioned in the list of mobile payment locations on its website. When I was about to pay, I found out that they don’t accept mobile payments.”
5) Confirmation. After the study, participants were re-contacted and asked about their mobile payment behavior. Mobile payments were treated as complements to other forms of payments (e.g., cash, debit, credit) and were only used when rewards such as discounts or special prices were offered for the use of paying with a mobile device.
Debunking the Mobile Payments Field of Dreams
The findings of the study aren’t surprising. Yet few financial institutions have implemented marketing programs to drive mobile payment adoption that are structured by the decision stages.
Instead, banks and credit unions have been lured by the mobile payment field of dreams: Offer Apple (or Android or Samsung) Pay, and they will come.
Many banks and credit unions jumped on the Apple Pay bandwagon when it was released, thinking it would get them in the mobile payment game, and enhance their reputation as a technology innovator. Hasn’t worked out that way.
The good news is that we’re still in the early innings of this game, and there’s time for financial institutions to re-tool their mobile payment strategies — strategies that must help consumers move through the five stages of adoption.