Thursday afternoon in a media-only session at the 2014 BAI Retail Delivery Conference, Leon Majors, senior vice president for Phoenix Marketing, presented survey research on the environment for Apple Pay and competing mobile wallet apps.
The survey, released September 9, the same day as the Apple Pay announcement, captured information from 4,200 households across the country with regard to smartphone usage, iPhone market share, and the hurdles mobile wallet systems face in gaining widespread adoption.
According to Majors, 200,000, or 1.6%, of the 12 million cash registers in the United States (not counting Square terminals) currently accept Apple Pay, but Google and PayPal still lurk and it might take years to sort out a winner.
“Apple took the first shot in a five-year knife fight,” Majors says.
The good news for mobile wallet providers is that smartphone and tablet usage continues to rise. Sixty-five percent of American households report owning a smartphone, with an average of two smartphones owned per household. The use of these devices for financial purposes, too, has increased. In 2013, 37% of households reported making a purchase, paying a bill, or transferring funds from a smart phone. In 2014, the figure is 49%.
Thirteen percent of respodents said they had used a smartphone app to make an in-store purchase compared to 11% in 2013.
And although the iPhone has a smaller penetration rate than Android devices, 39% of households compared to 51%, the Apple Pay announcement drove positive consumer sentiment. Based on survey data, 18 million households followed “extremely” or “very closely” to the announcement and 26 million households intend to purchase the iPhone 6 either “right away” or once their “contract expires.”
Still, there are lingering concerns over NFC, the availability of a locations locator, and customer service and tech support (right now the phone’s carrier, i.e. Verizon, is the primary representative for troubleshooting). But consumers' primary concern is security:
65% of respondents worry about hackers stealing personal information.
61% worry that the transaction is hacked during the purchase.
60% worry that they will be held personally responsible for fraud.
57% worry about a lost or stolen phone.
40% worry about tapping their phone against a terminal.
Respondents cited fingerprint scanning and phone scrubbing and restoring as two features that would increase their likelihood of using a mobile wallet payments app the most, both qualities of Apple Pay. However, 80% of respondents expressed confidence that in the event of a security breach, their bank will notify them; 47% felt that way about technology companies.
There’s a trust factor involved in the consumer decision to adopt a mobile wallet application, and respondents were more likely to turn to banks and primary card issuers than the likes of Apple, PayPal, or Google. More respondents said they would consider obtaining a mobile wallet from banks (71%) and primary card issuers (65%), but these percentages have declined year-over-year while PayPal has gained 14% to 55%, Apple has gained 7% to 29%, and Google has gained 4% to 21%.
Beyond security and terminal availability, one of the largest challenge Apple Pay faces is turning so-called prospects — those with the app installed — into users.
Of the 24% of respondents who had previously downloaded a mobile payments app to their phone, just 13% reported actually using it. It’s a gap that Apple, PayPal, and Google will have to close to succeed. But it’s possible.
“It’s just the opening salvo of this game,” Majors says. “And this game is going to run for a while.”