In-store mobile payments aren't taking off as quickly as expected in the US. BI Intelligence projects US in-store mobile payments will advance steadily at a 40% compound annual growth rate (CAGR) to hit $128 billion in 2021, up from $24 billion in 2016. This growth will be driven by new consumers using eligible smartphones, the normalization of contactless technology, and added wallet features that will drive repeat usage. However, while healthy, the market is far behind prior industry expectations, causing BI Intelligence to halve its projected growth rate for the second year running.
Major headwinds are suppressing US mobile wallet adoption. In-store mobile payments growth is likely to occur at a more measured pace due to difficulties associated with changing ingrained card payment habits, the perception of wallets as an unsafe novelty, and fragmentation that makes using wallets confusing. Overcoming these challenges will not happen overnight.
But overseas, growth has exceeded wildest hopes. In China and India, wallets have boomed — the Chinese payment landscape is worth $5.5 trillion, for example. However, takeaways from these success stories are limited — in China, wallets took off due to a lack of entrenched card payment usage, and in India, wallet use exploded after most cash was unexpectedly pulled from circulation. US providers cannot ride those tailwinds.
To power ahead, US wallets should look at pockets of success. Banks, merchants, and tech providers could each benefit from implementing strategies that have worked for early leaders. While no one wallet has cracked the code of mass adoption, each of these companies has made strides in key areas:
Apple Pay eliminates fragmentation. Apple Pay simplifies the use of mobile wallets for iPhone users by blocking competitive wallets from using NFC payments, and by partnering with third-party wallets as a funding mechanism.
Starbucks’ app enhances users’ purchase journey. The coffee giant adds value by letting users preorder drinks and skip the lines in-store, eliminating the steps for users between demand and purchase.
Samsung Pay’s rewards program builds repeat purchasing. The rewards program provides users with a clear incentive to keep returning to the wallet for payments, even after the novelty of phone purchases wears off.
Building multiple layers of value is key to getting ahead. While there are many small providers sharing the pie today, in-store [...]