Mobile Wallets Failing To Tear Consumers From Their Cold, Hard Cash – And Credit Cards

Nothing beats good old paper money and credit cards. That seems to be the consensus among most Americans when it comes to preferred ways to pay for goods and services. The impending explosion of mobile wallet use has once again taken a back seat to traditional payment methods.

Despite a number of start-ups and established technology firms racing to develop a mobile wallet system – where a purchase can be made by just hitting a button a smartphone – American consumers have yet to embrace the payment option, the New York Times reports.

In 2013, Americans spent about $37 billion through mobile transactions, up from $24 billion in 2012, research firm Gartner reports. However, that number is less than 10% of the $235.4 billion in mobile payments made worldwide in 2013.

Researchers say the reasons for the slow growth in consumer use of mobile payment systems is three-fold: consumers don’t know the product exists, the number of options is confusing and there is no specific benefit in using the system rather than cash or credit cards.

“There was the assumption that there was going to be some sort of spark that ignited the marketplace, and there was going to be a mobile payments revolution,” Denée Carrington, a Forrester analyst who studies the mobile payments market, tells the Times.

But that revolution has failed to take place. In fact, only about 25% of large retailers and 5% of small retailers use mobile payment systems.

While a mobile payment revolution hasn’t occurred yet, it’s not for lack of trying on the part of technology companies.

Start-ups like Square and LifeLock have developed apps that allow consumers to pay for products with just the tap of a button. For years, more established brands, such as Google, have offered products, like Google Wallet, that allow consumers to add their credit card information digitally and then tap their phone on merchant terminals to complete purchases.

However, none of those systems have found the magical equation to lure consumers to their products. And before consumers can be expected to flock to the products changes must occur, technology analysts tell the Times.

Currently mobile payment systems are not widely available at retailers, so when a consumer wants to make a purchase with a mobile payment system they must first investigate what retailers offer the option and what smartphone technology that store accepts.

To remedy the issue retailers would need to install new payment software and hardware, something industry insiders say won’t happen unless a large number of consumers were already using the service. And some argue that consumers won’t use the service because there is no advantage to using it over readily available cash or credit cards.

A former Verizon Wireless executive who worked on the company’s own mobile payment systems says for companies to attach consumers to the option they need to offer incentives that cash and credit cards cannot, like coupons and discounts.

Still, the pursuit of mobile payment systems continues. Earlier this year, Visa and MasterCard endorsed a tap-to-pay technology that already comes built into the latest Android mobile operating system.

This particular host card emulation (HCE) allows payment card information to be stored in the cloud, letting mobile apps access the information without using the secure element hardware embedded in the phone. Previously, mobile carriers have been able to control who gained access to the secure element, thus limiting the apps consumers could use for transactions. With HCE, consumers can bypass restrictions since mobile carriers can’t control the cloud.

Few Consumers Are Buying Premise of Mobile Wallets [New York Times]

Want more consumer news? Visit our parent organization, Consumer Reports, for the latest on scams, recalls, and other consumer issues.