Why Mobile Wallets Are Struggling

Just a few years ago, many in the banking industry predicted that mobile wallets would quickly replace consumer's use of cash and plastic. But mobile wallets haven't exactly taken off. Consumers just aren't that interested. The reality is that mobile wallets still have a long way to go.

What problem do mobile wallets solve? From the consumer’s perspective, not much. They don’t like change, and see little need to switch to a different payment method unless there’s a clear benefit.

For most consumers, using plastic is still pretty convenient. That’s why credit cards are still the most popular method of payment — especially for online purchases and more expensive items — followed closely by debit cards.

According to a study by Mintel, three quarters of consumers simply don’t see a need to change their payment behaviors, and only one quarter (27%) said they had any interest in using their smartphone as a wallet. There is significant reluctance to convert to mobile wallets — especially among women, who are roughly half as likely as men to have any interest in them.

A measly 8% of consumers say they have used Apple Pay, the most popular mobile wallet today. Another 7% have used Android Pay, and 6% have used Samsung Pay.

Only 17% of respondents in Mintel’s survey said they would switch to a different form of payment if it were easier than paying a different way. A similar number said they would switch if the new payment method would shorten the checkout process. Clearly payment habits are deeply rooted.

“Most adult consumers have fairly ingrained payment behaviors, and switching from a traditional wallet to a mobile one will take time,” Mintel wrote in their report. “If financial marketers are looking to carve out a greater portion of a consumer’s physical and digital wallet, innovation needs to concentrate on ways to continue to increase speed, accuracy, and security across payment types.”

According to research from Phoenix Marketing International, consumers are now less likely to link a credit card to a mobile wallet than they were a year ago, with only 18% linking a card in 2018 and only 14% using a mobile wallet to make an in-store transaction.

Low Trust in Mobile Wallets

In the YouGov study, one in five U.S. consumers said they think that payments will become completely cashless within their lifetime. Half of those believe that cash will disappear within the next five years.

Consumers may say they like the idea of a cashless society, but they still have serious reservations about mobile wallets. According to research fielded by YouGov, 43% of consumers don’t think mobile wallets are secure, and 38% are concerned about losing their device and therefore being unable to make any payments. In a similar study, Experian found that more than half (55%) of consumers prefer to use credit cards due to safety concerns.

Just listen to what consumers have to say when Mintel asked them why they are hesitant to use mobile wallets:

  • “I don’t trust it. I feel like it is not safe. If I were given a big enough reward, I may try it.”
    — Woman age 45-54, household income $100K-$150K
  • “I haven’t switched over to phone payments yet. I’m still not convinced of their convenience and security. Credit cards work just fine for me. There would need to be some benefit to me to switch over.”
    — Male age 45-54, household income $75K-$100K
  • “I am just not sure how safe it is.”
    — Female age 35-44, household income $50K-$75K

Even if a consumer does use mobile wallets, they are unlikely tell friends and family use them as well. 42% of consumers who use mobile wallets would not recommend the service vs. 31% just one year prior, according to a survey by Auriemma.

What’s the Future for Mobile Wallets?

The future for mobile wallets is hazy at this point, although it seems hard to believe that in an increasingly wired world that more and more payments won’t migrate to digital channels. After all, peer-to-peer payment platforms like Venmo and Zelle have been well-received by consumers. But inertia is a powerful force, and change doesn’t come easy.

“While digital payments are steadily growing in popularity, cash remains very much a part of consumers’ financial lives, even in the least cash-friendly countries,” notes Cleopatra Mavredis, Global Marketing Manager for Channel Solutions at NCR.

Some analysts in the banking industry, like Karen Webster with Pymnts.com, postulate that maybe — just maybe — mobile wallets won’t ever enjoy widespread adoption since they don’t seem to solve a real consumer problem.

“With few exceptions — Starbucks and Walmart Pay, to name two — mobile wallets are something the average consumer hasn’t really wanted to use at all, or at least not consistently enough to make it a habit,” Webster argues.

Webster’s position seems a bit extreme. It’s more likely that cash, cards and digital will continue to coexist, albeit with more transactions becoming cashless.

That said, the road ahead won’t be easy for mobile wallets. There are a number of challenges. For starters, it’s hard getting payment systems from an array of multiple providers to talk to each other… and deliver a frictionless cashless transaction. Another hurdle is that consumers typically don’t earn rewards when using mobile wallets, like they do with their airline mileage cards or cash-back programs.

According to Mintel, this presents a significant opportunity for financial marketers looking to increase adoption of mobile wallets. In their research, Mintel found that discounts, rewards and coupons could get consumers to switch their payment type over to mobile wallets.

“Banking providers who employ loyalty programs to engage and retain customers are better placed to increase usage and adoption of their mobile wallet service, thereby driving revenue growth,” says Ovum analyst Eden Zoller. “However, they must still address the gaps that exist between what customers want and what they are being offered.”

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This article was originally published on June 28, 2018. All content © 2018 by The Financial Brand and may not be reproduced by any means without permission.


  1. Christian Klacko says:

    It is that kind of poor attitude in adoption that is going to kill the American competitiveness. The Chinese are on their way to be the #1 leaders in FinTech…by far. There is no president who will be able to help us with that. Read more here.

  2. This article presents a US-centric panorama which is very different from the rest of the world. Because of this approach and the overall Wallet Arena, US Mobile Payments are trailing several other markets. Just compare the 5.5 Trillion in Mobile payments done in China with the 2.7 Billion made in the USA and you will get what’s wrong… You should certainly expand the perspective looking into other issues, like the horrific fragmentation in the “Wallets Arena” and non-ubiquitous offers posed by them. You shouldn’t bring up these issues as truths or trends because they are not. This is just an American Phenomenon underpinned by a very specific setting and banking environment.

    You might want to take a wider perspective by looking at the MobilePay wallet launched in Denmark, or the SWISH wallet in Sweden. Also, take a look at the VIPPs experience en Norway. Moreover, WeChat and Alipay has got most of the small business paying cashless. Chinese population doesn’t think cash or cards are necessary to go out and near 80% of people would go out without their wallet.

    Sweden might become the first cashless society by 2020. They now have only 2% of all payments done by Cash. There’s not a Wallet security issue. What really happens in American Market is that payments stakeholders aren’t putting the user and merchant experience in the first place. Payments stakeholders, specially Banks, have taken up the “Wallet Arena” as a pit-style fighting event. Everyone wants to emerge as a winner withount considering that, the market and the society should be the winner. Just look at the nature of SWISH and how the banks accorded the planning, and the range and reach of this undertaking. Take a look at the MobilePay and you will cope with their “Customer/Society-Centric Vision”. This is, in my humble opinion, what is missing is USA…

    …And, by the way, you as the “experts” trend-setting stakeholders are contributing little by acknowledging these “false-positive” trends and passing on for other to follow.

  3. The Financial Brand is written and published for English-speaking readers — primarily a North American audience. As such, we concentrate on what you label “American Phenomena” (as specific and disappointing as that may be).

    One thing to keep in mind is that most other countries have only a handful of banking providers — typically only about 4-6. It’s much easier to get the financial industry in such countries to move in a new direction when all it takes is the consensus of less than 10 organizations (including regulatory bodies). The U.S. banking sector — as a whole — tends to move much more slowly than others because there are over 5,000 banks and over 5,000 credit unions. Getting the majority of a constituency that size to agree on anything is nearly impossible.

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