Contributed by Magenic
Written by Russ Miller

Mobile payments are catching on.  By 2020, analysts forecast that mobile commerce will account for more than half of all online sales[1] and that mobile payments will surpass the use of credit and debit cards.[2]

However, in spite of promising growth, mobile payment adoption in the US isn’t moving as quickly as expected or as quickly as in other parts of the world.  Why?

Domestically, there are three primary obstacles to mobile payments becoming the tender of choice:

  • Security concerns;
  • Spotty merchant acceptance; and
  • Perceived lack of value.

Security Concerns
With high profile personal data breaches frequently making headlines, nearly three quarters of consumers cite security concerns as the primary reason for avoiding mobile commerce and payments.  Fears range from simply receiving unwanted email to identity theft.

From a transactional perspective, most mobile payment provider technology approaches are as secure as traditional credit/debit cards.  With widespread adoption of the Host Card Emulation (HCE) standard for Near Field Communications (NFC)-based payments, mobile transaction security has increased as the security model has moved from the device to the cloud.  In addition, HCE has enabled service providers to take transactional control from network operators, reducing transactional complexities and costs.

That said, consumers remain vulnerable to a wide range of attack vectors that can compromise mobile device/network security and risk mobile payment credentials.

Merchant Acceptance
Even today – two years after US retailers were required to adopt chip and pin-enabled payment terminals – a significant portion of retailers still require swipe transactions.  In the physical world, mobile payment capabilities – predicated on availability of advanced payment terminals – similarly lags.

Moreover, retailers frequently accept only selected competing mobile payment providers; one never can be sure which mobile payment providers will be accepted.  Looking over the supported payment provider logos at checkout can be more work than presenting a credit or debit card.

Perceived Lack of Value
While mobile devices continue to herald the promise of replacing our physical wallets, the reality is that many of us must continue to carry government and corporate identification, such as a Driver’s License or an access card.

For example, consumers do not want to lose the benefit of loyalty programs, in-store coupons and redemptions based on branded accounts.  Carrying a wallet containing loyalty-driven credit and debit cards that can be quickly accessed and used for reliable payment is comparatively easy and dependable.  If the choice is between paying for a purchase with a phone or a credit card at the moment of purchase, it does not make a difference in terms of convenience: either way the consumer has to pull something out of his or her pocket or purse.

Mobile Payment Adoption Outside the US
While mobile payment in the US continues to face obstacles to widespread adoption, trends in other parts of the world – notably China – provide insight into how the transition to mobile payments is occurring.

Research indicates that 76 percent of Chinese consumers in metropolitan areas used or were interested in using mobile wallets. That’s more than twice the number of the urban online US population (36 percent).  With such a high level of interest in mobile wallets, mobile payments more than doubled to $5 trillion USD in China in 2016.[3]  Conversely, Americans were projected to spend just $27 billion in 2016.[4]

A key feature of the Chinese mobile landscape is that leading mobile payment providers offer their own secure payment ecosystems, even though their primary businesses may range from online commerce to messaging.

In addition, Chinese mobile payment providers offer not only mobile payment capabilities, but also a full range of services.  Initially, they offered “red envelopes” at Chinese New Year, which offered a simple process to send monetary gifts to friends and family.  Today, customers can manage a majority of their daily activities – from messaging to commerce to getting laundry picked up to booking a karaoke room – all within a single mobile application.  In this context using mobile payments is seamless and easier than reaching for your wallet.

Mobile payments have taken off in Asia for a number of reasons in addition to convenience.  For example, China’s financial system does not have similar regulatory restrictions as in the US, and most Asian countries do not have the same existing payments infrastructure as the US.

Compared to Asian mobile payment progress, US-based mobile payment systems still have a long way to go.  While new technology at point of sale has not been implemented as quickly as expected, service providers need to offer more to consumers, a benefit greater than mere convenience.

How can mobile payment systems create a greater experience than any other payment option?  Successfully answering this question will be the key to mobile payment adoption.

About Magenic
Magenic is a leader in business technology consulting. From product strategy to execution, Magenic has the right strategy, the right process, and the right talent to deliver your digital products with unmatched quality and speed. Learn more at www.magenic.com.

Russ Miller, RussM@magenic.com
Solutions Architect, Mobile UI/UX


[1] https://paymentweek.com/2017-9-15-mobile-commerce-represent-half-online-sales-2020/
[2] https://pctechmag.com/2017/10/mobile-payments-set-to-surpass-credit-cards-by-2019-in-online-commerce/
[3] https://www.cnbc.com/2017/10/08/china-is-living-the-future-of-mobile-pay-right-now.html
[4] https://www.emarketer.com/Article/Mobile-Payments-Will-Triple-US-2016/1013147