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Mobile Payments 'Very Unimportant' to Consumers

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Google Wallet and its rivals are coming soon to bank customers' mobile phones — but it turns out the vast majority of those customers couldn't care less.

Banks and their partners could be wasting money developing mobile wallets and other ways for Americans to pay at the checkout counter with their smartphones, according to a survey published this month by Lightspeed Research.

The ability to make mobile payments is "very unimportant" to about half of credit card customers with smartphones, Lightspeed found. Only about 15% of the customers surveyed said it was somewhat or very important to them to be able to pay with their smartphones.

"There is a lot of buzz right now, but it's not yet a reality for most consumers," says Greg Flemming, a senior vice president in Lightspeed's financial services group.

Much of that buzz is coming from Google Inc.'s mobile wallet, which launched this week. The smartphone payment system was unveiled this year and has been breathlessly anticipated ever since.

But payments industry members are skeptical that bank customers will actually want to use the Google Wallet, or its current competitors.

"I don't think consumers are asking for this because they already have credit cards, which are really a type of mobile payment," says Jim Smith, president of consultancy Blue Dun. "The killer application in mobile payments hasn't happened yet."

Many industry members say that consumers will adopt mobile payments once the right product is created. Apple Inc., for example, has succeeded largely by selling people products that they don't know they want, in the words of Steve Jobs.

But as consultant David True points out, "there are very, very few people who can build something as customer-friendly as Apple can."

The splintered nature of the payments industry, and its overlapping efforts to develop mobile payments, are also a barrier to consumer adoption, he says.

"Apple does what they do so well because they insist on controlling all the parts," says True, the executive director of consultancy MCAWorks and a former MasterCard executive. "That's the opposite of the payments industry, which is so fractured."

Banks, credit card networks, telecom providers and technology companies are all trying to stake a claim in the developing U.S. mobile payments industry without yet knowing what the ultimate consumer interest in it will be.

Google, for example, initially worked with MasterCard Inc., Citigroup Inc., Sprint Nextel Corp. and First Data Corp. to develop its wallet. But the Internet search company says this week that it had also signed a similar deal with MasterCard rival Visa Inc.

The Google Wallet is competing with rival efforts from several large financial, technology and telecom companies, including the Isis joint venture backed by top wireless carriers and Visa Inc.'s mobile payments projects with top U.S. banks.

Mobile payments boosters say it will be faster and more convenient for customers to whip out their phones than to pay with their credit cards. Mobile wallets also rely on the extra incentive of merchant coupons for people who pay with their phones.

But many industry members — even including some MasterCard executives — acknowledge that the convenience of traditional credit or debit cards is hard to beat.

"It's not easier, faster, better, more helpful to pay with your phone than to take your wallet out," True says. "The fact that [mobile payments are] technologically better and it makes sense inside the industry does not help change the minds of the people who have a system that works quite well."

Lightspeed surveyed 10,000 consumers at the end of June, including almost 2,400 smartphone users.


(8) Comments


Comments (8)
This reminds me of when I bought my first family car (a minivan, I'm slightly embarassed to admit!). The salesman urged me to get the model with 3 automatic open/close doors, instead of just one. I had never had automatic doors, and ultimately, I bought the model with just one. Now, that I have experienced the door technology, boy would I love to have the version with three!

Uncool vehicles aside, my point is that many times we don't know what we want until we have it. I agree that we are peaking on the technology hype curve when it comes to mobile payments, but I also think down the road mobile payments will become very important to consumers.

That said, our data also show consumers aren't that interested in the mobile wallet right now, too.

Thanks for writing,
Jennifer Johnston Canfield
Compete, Inc.
Posted by Jennifer C | Thursday, September 22 2011 at 8:51AM ET
I disagree. With groupon and ways to save money these days, no one wants to cut coupons and worry if they have them with them etc.

With smart phones you can scan the coupon, pay with wallet, and get reciept seent to email like apple does. \

If you ever used the app Tripit you can log travel, check in from site, use google maps from within app to get from point A to B and now check into your flight with the QR codes.
Posted by craig c | Thursday, September 22 2011 at 8:55AM ET
Agree with Ron S. The payments industry has been a "push" industry since its inception. Who thought they needed a credit card before they had one? How about a debit card? How about a card with a mag stripe? All of these advances were pushed to cardholders. One can say the same about mobile phones, and specifically smartphones.

People consider mobile payments "very unimportant" because they don't have widespread capability to use them yet. When this happens -- and all indications are that a sea change is occurring making this possible -- the market will reach that point where consumers won't be able to believe they ever lived without it.
Posted by visainc | Thursday, September 22 2011 at 11:57AM ET
There are some good points here. However, the survey is flawed. Over 75% of the audience is non-smartphone users, who I suspect were able to understand what the functions, features and apps inside a smartphone add value to one's daily life. The mobile payment we talk about here is 100% on smartphones, with the caveat that there are multiple alternatives that do not rely on smartphone.

"Lightspeed surveyed 10,000 consumers at the end of June, including almost 2,400 smartphone users."
Posted by saoke0707 | Friday, September 23 2011 at 9:57AM ET
Hi Vincent -- thanks for your comment. The data discussed in the article (and illustrated in the graphic) reflects responses only among those 2,400 smartphone users. ("The ability to make mobile payments is "very unimportant" to about half of credit card customers with smartphones, Lightspeed found.")

So I agree that the sample is smaller than the 10,000 total that Lightspeed surveyed, but it's not flawed.
Posted by maspan | Friday, September 23 2011 at 11:57AM ET
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