Digital wallet momentum stalls
- Consumer use of digital wallets has stalled over the past year because services haven't given enough incentive to use them, according to a February report from 451 Research.
- In a survey of 3,568 tech and business professionals, 25% said they are very or somewhat likely to use digital wallets to make purchases over the next 90 days. This is just one percentage point higher than the 24% who answered the same way three years earlier, in a December 2014 survey.
- The response level had risen to a high of 29% in December 2016, before retrenching to the current level, which is the lowest since January 2016.
After three years of being declared the next big thing in payments, digital wallets have shown little growth since their early adoption phase, with not much momentum predicted for the near-term future.
Additional research from Capital One shows that the use of cash is waning, with 41% of those surveyed saying they carried cash regularly, while 25% reported they rarely or never carry cash. Millennials are especially cash averse, according to the survey, with 34% of those ages 18-25 saying they rarely or never carry cash compared to 25% among those over 55.
But what has replaced cash for these people? Credit and debit cards, and now the digital alternatives easily used on the smartphones most consumers now carry. Digital payments increased to about $721 billion in 2017, said 451 Research, citing Experian. For context, credit card purchase volume in 2016 was $3.34 trillion, according to Statistica. Because of this reliance on credit and debit cards, mobile payment apps like Apple Pay and Google Pay are being embraced far more slowly in the U.S.
A new study from Juniper Research found that 2.1 billion consumers worldwide are forecast to use mobile wallets for payments or money transfers by 2019. This is a growth of nearly 30% over the 1.6 billion who used the mobile wallets last year.
The 451 Research study found that the biggest barrier to digital wallet use is security, with 63% saying that better security versus traditional payment cards would bring them around to using the digital systems. But 451 Research noted that Entrust Datacard, a financial transaction security firm, said banking with mobile devices is more secure than online banking.
Apple Pay and Paypal are the top digital wallet choices in terms of planned and current use, as well as in satisfaction. But 451 Research noted that there are many new entries competing for payment app usage from retailers and banks. Alibaba's Alipay is also expanding in the U.S., but mainly with Chinese tourists.