While more than 90% of surveyed U.K. consumers know about mobile payments, that doesn’t mean they are going contactless. Morgan Beard, Strategic Marketing Director at TSYS, sat down with PYMNTS to discuss what U.K. consumers really think about mobile payments and the 3 things that are needed to boost adoption.

PYMNTS: To get started, what was the aim of the 2016 U.K. Consumer Payments Study?

MB: As the consumer is the driving force behind our collective livelihood, we need to better understand their sentiments. Last year, we launched our inaugural report on consumer payments in the U.K. and part of this year’s report is about comparing the key consumer payment topics with those of the previous year. We have also added some sections around emerging payment topics that are currently being discussed in the industry — things such as peer-to-peer payments, mobile payments and virtual currency. The goal here is to really understand and examine these consumer trends and to start predicting some future consumer behaviors in terms of payment technology adoption.

PYMNTS: For a few years now there has been talk about the approaching breakthrough of mobile payments. Until now, this breakthrough has failed to materialize in the U.K. What are the reasons for this?

MB: In general, for mobile payments to take off, three key technology adoption challenges need to be met. From the consumer side, the level of penetration of smartphones has to reach that tipping point, and from the merchant acceptance perspective, it’s all about the POS terminals and how they need to be upgraded to accept NFC payments. Then there’s the play around security, with tokenization, the secure element, and HCE, etc. Smartphones are pretty much ubiquitous, the POS terminals are all going to be NFC-enabled throughout Europe due to the 2020 Visa and MasterCard mandates, and that just leaves the consumer concerns with security. That was really demonstrated and stuck out in the report, where consumers rated security concerns as a leading impediment to adoption. But it was interesting to note that when we explained the benefits of the security of tokenization, a third of the respondents showed that they would be more inclined to use mobile payments. While that’s encouraging of course, the remaining two-thirds were not swayed to switch.

As such, the long-term viability of mobile payments is about more than just overcoming technology constraints. It’s really contingent upon the entire ecosystem to deliver much more of a demonstrable value-add for the consumer above and beyond the traditional physical card payments. For example, what would it mean if we could deliver some mobile-optimized loyalty programs or laser-focused offerings from merchants that really enhance the cardholder lifestyle? I think those would be an example of what would it take to overcome the two-thirds that weren’t swayed solely on security measures.

PYMNTS: What was the most surprising finding of your study?

MB: One of the things that really stood out was the respondents’ overall awareness level of emerging payments. In July 2015, we witnessed the U.K. launch of Apple Pay and as such we expected to see a higher level of awareness related to mobile payments and contactless in general. While that was the case, we were particularly surprised at the high level of awareness around P2P payments and virtual currencies specifically, with 70 percent of respondents knowing about P2P payments and 43 percent knowing of virtual currencies like bitcoin. Those data points show just how fascinating this realm will be to monitor and participate in in the near term.

PYMNTS: With the advent of mobile banking features, it seems that consumers will be likely to want to self-manage and control specific functionalities of their cards. What does the data from the respondents indicate?

MB: It’s really all about customer engagement. Coming into this research our thesis was that the convenience and control inherent in today’s consumers’ digital lives – like the  ease at which people can slide their controls on their iPhones – would start to extend into their expectations for engagement with their payment cards, too. The 2015 and 2016 studies have really confirmed the importance of these specific banking tools that allow consumers to proactively manage, monitor and track functionalities of their accounts.

For instance, the idea that receiving alerts each time a transaction is made with a card or the ability to temporarily disable an account to prevent unauthorized transactions were two items that ranked quite highly, with over 60 percent of our respondents finding those features really valuable. Combining that with the whole idea that these control and preference management options are of particular interest when provided via the mobile channel, we start to understand what it really means to focus in on those capabilities.

PYMNTS: Installments enable shoppers to split transactions across monthly installments using their existing cards. How valuable will this service be from a consumer point of view? Which consumer segments find this option more valuable?

MB: The study showed a significant portion of respondents that consider the idea of paying in installments a very attractive proposition. In fact, 45 percent of respondents felt installments were valuable or very valuable, a 7 percent increase over 2015. When you ask about who in particular is interested, out of all the demographics we segmented, it was the age of consumers that stood out. Overall, the younger respondents tended to be more interested in installments. However, it was kind of an anomaly there that the age group of 65 and older bucks that trend. I find that fascinating as well and maybe that’s due to the fact that there are fixed incomes in that group that make installments an attractive option for pensioners or retirees.

PYMNTS: Contactless has reached critical mass, but still not everyone has embraced it. What is the issue with the holdouts?

MB: We asked about the overall awareness of contactless payments and over 90 percent of respondents were indeed aware of contactless. The usage level is at roughly 50 percent, which is pretty significant already. When we looked at all of the socio demographics again it was the younger consumers, that 18-34 age group, driving the usage rates together with the wealthier households, those with incomes over £50,000 per year.

When it comes to the issues for holdouts, I think there’s a real opportunity to further the outreach to the older generations —particularly those concerned about the security elements of contactless payments — as well as continuing to work with the merchant community outside of the greater London area. But progress is happening on that last point. My takeaway is that things are coming, and coming pretty quickly, in the contactless space.

PYMNTS: What role will cash still play in the U.K. in, let’s say, 2020?

MB: In looking at research from the U.K. Payments Council, it showed that the share of cash for consumer and business transactions just dropped below that magical 50 percent mark last year, with a 4 percent year-to-year decrease. We can probably expect to see this trend accelerate in the coming years, particularly as we see the continued shift to eCommerce coupled with the convenience that everybody is recognizing around contactless and mobile payments too. Emerging payments like P2P and virtual currencies are still a bit of a wildcard but we should expect these trends to continue to move in the right direction.

In looking four or five years out, so by 2020, we’d see the cash share well below where it is now. For the diffusion of non-cash payments to continue it’s really incumbent upon us in the industry to cooperate in order for us to really see those advancements. We are starting to see that cooperation blossom now, so it should be a very exciting ride for those of us in the industry.

To download TSYS’ full study, click here.


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The CFO’s Guide To Digitizing B2B Payments, a PYMNTS and Comdata collaboration, examines how companies are updating their AP approaches to protect their cash flows, support their vendors and enable their financial departments to operate remotely.