Mobile Payments – Trouble in paradise

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Mobile Payments are going the wrong way.

• It appears that the usage of Apple Pay on the iPhone is now declining compared to where it was in June 2016, sending a worrying signal for the outlook for mobile payments in general.
• The most recent data from PYMNTS.com (see here) shows that both adoption of Apple Pay and its usage are showing the first signs of decline.
• Android Pay and Samsung Pay have yet to show this decline but I suspect that this is due to the fact that they have not been around long enough to show this trend.
• Neither of these two offer anything that Apple does not and in almost every case, I think Apple does it better.
• The percentage of iOS users surveyed that had tried Apple Pay fell from 23.8% in June 2016 to 21.9% in March 2017.
• Furthermore, in March 2017, 48.6% of those users that had not tried Apple Pay said that they were happy with their current payment method (plastic card) compared to 37.0% in March 2015.
• Of those that have used it, those that “use it at every opportunity that I get” fell from 48% in March 2015 to just 18.7% in March 2017.
• It also appears that security, ease of use or the store’s ability to make the payment work are not the reasons for Apple Pay’s lacklustre performance but more the fact that paying with plastic is just fine.
• I think that this is a great example of how important it is to offer a better experience when one is looking to drive adoption.
• Paying with a mobile phone is no easier or convenient than paying with a card and in many circumstances, it is much more difficult.
• This also explains why mobile based payments have been so successful in China despite being based on the much maligned (in developed markets at least) QR code.
• The offline experience to do almost anything in China is dire when compared to USA or Europe which has meant that even QR codes offer a huge improvement in the user experience.
• For example, when using WeChat Pay, the time required to buy a train ticket can be reduced to 5 minutes from 45 and wait time at a hospital can be reduced to 20 minutes from 2 or more hours.
• This is the issue that I see with mobile based payments in developed markets.
• Plastic cards have very high penetration and almost everyone accepts them.
• At the same time payments using a mobile phone don’t particularly improve the user experience for the consumer which is what I think has led to the ambivalence that this survey is pointing to.
• The net result is that to win the kind of adoption that China has, mobile based payments need to offer the user a compelling reason to use them.
• Failure to do this could see adoption and usage decline to a niche of power users with the vast majority of users sticking with plastic cards which, by all accounts, are plenty good enough.
• It looks like wallet manufacturers are going to be in business for much longer than anyone thought.