First Annapolis recently completed the third edition of its semi-annual Study of Mobile Banking & Payments tracking consumer adoption and use of mobile banking and payments products.
Given the energy surrounding all things mobile, it’s not surprising that consumer adoption levels are rising, but there is still a long way to go before consumers leave home without their wallets—and much that banks can do to help pave the way – writes Melissa Fox, Senior Manager, Emma Causey, Senior Consultant, and David Cencula, Senior Analyst, each in Payments Strategy and Innovation, First Annapolis.
Growing Adoption of Mobile Payments
Consumer use of mobile channels, including both mobile banking and mobile payments, is steadily increasing. In May 2015, 40% of respondents had made a mobile payment within the past 12 months. One year later, that figure is now 74% (see Figure 1).
In-app/online purchases have overtaken bill payment as the most common form of mobile payment, and adoption of other forms of mobile payments (ranging from receiving loyalty points to P2P payments to paying for parking, taxis, and transit systems) has increased as well.
Figure 1: Adoption of Mobile Payments by Type
“Which of the following types of payments have you made using your mobile phone within the last 12 months?”
Source: First Annapolis Consulting, Study of Mobile Banking & Payments (June 2016).
Mobile wallets also gained traction: 51% of respondents report having a mobile wallet on their phone.
Apple and Amazon were the most frequently cited providers, and only 7% of wallet users currently get their wallet through their bank.
Banks, however, are respondents’ preferred provider, cited by 40% of current wallet users and 55% of non-wallet users. Mobile wallet users also ranked integration with mobile banking as a “must have” feature of mobile wallets, alongside widespread merchant acceptance and coupons/discounts.
These findings suggest that banks have an opportunity to play a greater role in mobile payments, and bode well for recently announced FI wallets (e.g., Wells Fargo Wallet) that combine both banking and payments.
Not yet an Apple (Pay) a day…
Adoption and use of the Pays (Apple Pay, Android Pay, Samsung Pay) is increasing, and satisfaction levels among users remain consistently high. Nevertheless, significant runway remains as 75% of survey respondents with compatible devices have not enrolled in a Pay service and only 4% report using it regularly (1x per week or more) (see Figure 2).
Figure 2: Pays by the Numbers – June 2016
*Device compatibility: Apple Pay: iPhone 6, iPhone 6S, and iPhone SE devices. Android Pay: Android devices with 4.4 KitKat or higher. Includes 174 respondents that reported ‘do not know’; as a result, Android Pay awareness/adoption rates for those with ‘compatible devices’ may be understated.
Samsung Pay: Samsung Galaxy S6, Galaxy S7, or Galaxy Note 5 devices.
Source: First Annapolis Consulting, Study of Mobile Banking & Payments (June 2016).
Lack of merchant acceptance and security/privacy concerns were cited as the most significant barriers to adoption and use in the current environment. Increased deployment of contactless terminals as part of the EMV migration and expansion into new acceptance channels (e.g., ecommerce) are likely to facilitate adoption and usage.
Integration of NFC payments into banks’ mobile banking solutions will also help drive adoption of tap-and-go payments at the point of sale, but could introduce competition for the Pay services.
While adoption of the Pays has been slower than many anticipated, the expansion of mobile payments, and mobile engagement more broadly, is clear. The migration to mobile is shifting the playing field within the payments industry in ways that could have a long-lasting effect on consumer behavior and market competition.
As adoption and usage of mobile payments increases, banks should fight aggressively for “top of wallet” status and ownership of the consumer relationship. The consequences of not doing so are significant now, and will only become more so in the future.
For the full mobile payments study, click HERE
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