CUNA Payments Blog: Time to ‘blow up’ the mobile wallet?

CUNA Payments Blog: Time to ‘blow up’ the mobile wallet?

Today’s digital wallet capabilities are insufficient to upend longstanding consumer behavior.

May 3, 2016

Despite the hype and investment of promotional muscle, nearly 18 months after going live the mass market response to Apple Pay remains muted at best. The Apple Pay Adoption Tracker from and InfoScout indicates that while the share of eligible iPhone users who have tried Apple Pay has ticked upward (now approaching 25%), repeat use continues to decline.

This has not deterred competitors from doubling down. In its new major TV ad campaign, Samsung Pay is positioned as a central feature in the rollout of the next generation of Samsung handsets.

Chase and Walmart also have announced high-profile rollouts of their own mobile wallets.

This begs the question: What will it take for consumers to embrace the concept of mobile wallets? The short answer: a lot more than what they’ve seen to date.

Consumer behavior clearly telegraphs that from their perspective, payments aren’t broken, they simply don’t see the process of pulling a plastic card from their wallets to be that onerous.

According to InfoScout, the No. 1 reason Apple Pay hadn’t been used for a given transaction is “I forgot.” That’s hardly the sign of a compelling value proposition.

To date, digital wallets have focused on bread-and-butter features like security, which lack the sizzle to generate market excitement—at least until the next high-profile data breach.

Another key attribute is ubiquity: the ability to use the solution anywhere. The second most common reason given for not using Apple Pay is, “I didn’t know if it was accepted at this merchant.”

Samsung Pay aims to break this logjam. Its embedded technology leverages the magnetic stripe reader of nearly all merchant terminals, making it usable at a reported 90% of outlets.

Samsung Pay has not yet generated the same level of independent adoption research, so we’ll need to wait a bit longer to learn whether removing that barrier is enough to attract more users. Product roadmaps for Apple Pay and Chase Pay call for more robust rewards program capabilities—another stated consumer want, if it meaningfully improves on the existing process.

But, as pointed out on a recent Best Innovation Group podcast, perhaps these providers are approaching the digital wallet issue from the wrong angle. Maybe our imaginations have been constrained by clinging to the notion of the wallet itself.

As John Best speculates, “What if I became the wallet?”

It takes as long to pull out one’s wallet and present a card as it takes to pull out a phone and activate an app (notably, some solutions do not require an app to be launched). So why not eliminate this step?

Smart watches could serve this purpose or, more ambitiously, biometric factors such as facial recognition that offer the additional benefit of tighter security.

It’s amusing to note that in this scenario, smart watches have already been relegated to the “old technology” category. Check out Google’s Hands Free feature currently in limited pilot for a glimpse at the possibilities.

Meanwhile, Chase Pay is teasing intriguing features like safe and convenient pay-at-the-pump functionality.

Walmart Pay offers the retailer its long-awaited opportunity to steer customers to lower-cost payment methods. It’s the strongest profit motive yet for any of these players, and one that could spur some interesting consumer offers.

However, these enhancements remain incremental in nature and availability of the features may well be many months off. Time will tell if such forward steps spur meaningful adoption increases, but they’re unlikely to change the landscape overnight.

Regardless, it’s increasingly clear that the digital wallet capabilities in market today are insufficient to upend longstanding consumer behavior. Maybe it’s time to “blow up the mobile wallet” and pursue a more groundbreaking angle.

GLEN SARVADY is an analyst with Best Innovation Group, a CUNA consulting partner supporting CUNA’s efforts in advocacy, compliance, and keeping credit unions informed.