Mobile Payments

Mobile’s Black Friday Whiff

We at PYMNTS desperately wish we had a short-range time machine.  We don’t want to go very far back in time — we don’t need to pet a dinosaur, don’t wish to live through the Black Plague, and while character building, don’t think we’d like to live in a world where there wasn’t indoor plumbing.

But if we could just go back 5 or 10 years, tops, into the past — now that could be very educational.

And entertaining.

For example, if we had our not-so-wayback machine right now, we would use it to travel back in time to Thanksgiving 2014 to ask people which conversation they were more likely to be having at Thanksgiving 2016.

  1. Wow, I can’t believe I haven’t used a plastic card in 18 months. I just love paying for everything with my smartphone — it really is so much more convenient!
  1. Donald Trump is going to be the 45th president of the United States.
  1. Chatbots have truly changed my life.

We are just going to guess that if we asked 100 people,  95 of them would have immediately picked Door #1.

And in fact, we think rapidly forthcoming ascendance of phone-based payments in stores in place of plastic cards could have easily won a foot race against all kinds of things that actually happened this year:  Britain bailed on the EU, Brangelina is no more and Bob Dylan is a Nobel Laureate — and we’re pretty sure that from the point of view of 2014, mobile payments consigning plastic cards to the scrapheap of history seemed much, much more more likely than any of those things.

Because as of Thanksgiving Day 2014 – paying with a mobile phone in a store was hotter than a summer day in Miami.   

Apple Pay had just launched as part of the massively popular iPhone 6, a million people downloaded it in its first few days on the market and banks were so excited about it, they weren’t just signing on, they weren’t just paying Apple a tiny toll anytime someone used the mobile wallet — they were even doing Apple’s advertising for them.  For those who can still remember the holiday season ads of two years ago — Apple Pay was popping up all over them, ready to make Yuletide commerce that much easier.

Game. Set. Match.  Victory — Apple.  That was a consensus that built almost overnight.  People who had never once thought about or even really heard about mobile payments were pretty sure Apple was about to turn the world on with their payments method and Google might just get pulled along on its NFC coattails.

There were doubters, of course.  When interviewed the day after the Apple Pay announcement, Continental Advisors’ Paul Purcell noted that it was an interesting early play in was was going to be a “very long mobile payments ball game.” Dr. David Evans noted Apple Pay’s most unusual ignition strategy and that despite his tremendous Apple product fandom, he was fairly certain that they didn’t have a clear path to mass adoption by either consumers or merchants.

“I wouldn’t write Apple Pay off as another payment system fizzle. But the economics, history and math of two-sided platforms tell me that Apply Pay isn’t going to ignite quickly. This new payment platform is likely a long-play, a slow burn.”

That article was published on Halloween; a little under a month later, Apple Pay got its first big and public test on Black Friday — and PYMNTS, in partnership with InfoScout, was there to do the grading with the first installment of our Apple Pay/Mobile Payments tracker.

It was not exactly an A+ kind of day.  Frankly —  it was kind of a bust.

When the figures were counted, almost 96 percent of the people who could have used Apple Pay — were at a POS that accepted it with a phone that could use it — didn’t, and only 9 percent of users gave it so much as a single try.  And since the phone that Apple Pay worked on had been in the market for less than a quarter at this point — safe to assume these folks were early adopters and thus not naturally shy of new technology. The main issue, the data showed, was that most people didn’t know if the store accepted or forgot that they had it on their phone at all.

Not a great result — but of course, Apple Pay was new and it wasn’t well known.

 

Which brings us back to 2016.

Because while sometimes the passage of time makes a big difference, in 2016 — not so much.  Consumers, by and large, are still whipping out the plastic the vast, vast majority of the time.

Apple Pay — as the last two years of data tracking have demonstrated — has in fact been a long slow burn. Very slow.  As the early adopters shifted into regular consumers, Apple Pay’s usage has actually fallen off.  Fewer that 20 percent of eligible customers have tried and used the service, and less than 5 percent of those with phones and at stores with NFC terminals regularly use Apple Pay.

And Apple Pay’s numbers are actually better, mostly, than rivals Samsung or Google Pay’s.  Only mostly — because Samsung Pay is beating Apple in one key category — repeat usage.  Apple is getting more people to the table than Samsung at present — but Samsung is doing better getting its users to come back for seconds.

And given the march of the numbers so far, this year’s results for in-store mobile payments during the holiday shopping weekend are less than wholly remarkable.

Almost 90 percent of in-store payments were via credit cards on Black Friday. And no, mobile didn’t get close to capturing that last ten percent — mobile phone payment apps accounted for just 0.6 percent of the day’s commerce, according to Cayan’s latest data.

Now if one is being positive, that is much better than mobile payments did on the whole last year — it is a double up — but in the grand scheme of the physical retail spending, mobile wallets’ take was slightly larger than a rounding error. And though some regions did better — and worse — than others, the only place in America where mobile payments managed to crack 1 percent was California.

 

So what gives? Where’s all that mobile love?

“When it comes to using mobile payments at the point of sale in a store,” InfoScout’s Jared Schrieber noted in a chat with PYMNTS on mobile’s holiday prospects, “adoption in the US has not lived up to anyone’s expectations with just a fractional percent of all eligible transactions when someone has the right device and is at the right retailer where they actually pull it out and use it.”

That, he noted, is a very different story when consumers are shopping online. That type of mobile payments is exploding — and will likely only continue to grow as consumers are increasingly getting used to and finding it ever easier to tap and pay as they go on a smartphone.

But for the in-store payments — he confirmed what our data has been disclosing for the two-plus years we’ve been tracking it. Not much going on.

“We’ve got muscle memory to reach for our wallet instead of our smartphone at checkout. And it is going to take a lot to break many, many years of muscle memory development.”

And the numbers from Black Friday — and the rest of the last two years — indicate that so far, the card habit has not even remotely been overcome.

 

But stay tuned.  

Samsung has decided to level up its rewards — to create a special set of incentives for its mobile wallets — and it will be interesting to see if and how Apple and Android decide to follow suit.

And of course, customers are shopping on their mobile phones — just not in stores.  But then, they are shopping less in stores, too.

So it might be another blue Christmas for mobile in-store payments in 2016 — but a new year is coming soon.  Maybe next year’s Thanksgiving conversation will be about how much we all love using our mobile phones to pay for things in stores after all.

And how much chatbots have changed our lives.

 

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Latest Insights: 

The Which Apps Do They Want Study analyzes survey data collected from 1,045 American consumers to learn how they use merchant apps to enhance in-store shopping experiences, and their interest in downloading more in the future. Our research covered consumers’ usage of in-app features like loyalty and rewards offerings and in-store navigation, helping to assess how merchants can design apps to distinguish themselves from competitors.

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