What Will It Take To Turn The Hype Of Mobile Payments Into Reality? INDUSTRY INSIGHT Paradigm Shift The term “paradigm shift” entered the ranks of knowledge advances and described the catalyst for “gobbledygook” many years ago. That is too bad since the process as being a paradigm shift. it is a word with a very important, legitimate pedigree. Fifty-five years ago, Thomas Kuhn made the word Before Kuhn, the view was that science evolved famous. He was writing about how scientific thanks to long slogs by past researchers, theorists and experimenters, if not towards “truth,” then at US Proximity Mobile Payment Transaction Value, least towards greater and greater understanding of 2011-2017 the natural world. Kuhn’s version of how science billions and % change develops differed dramatically. $58.42 273.8% Where the majority saw steady, cumulative 225.6% “progress,” he saw discontinuities – a set of 173% alternating “normal” and “revolutionary” phases in which communities of specialists in particular fields are plunged into periods of turmoil, uncertainty and $26.45 angst. The revolutionary phase of the Kuhn Cycle 148.6% often occurs when existing information is 120.8% interpreted differently than it was in the past. 93.4% $9.69 $2.59 $0.17 $0.54 $1.04 2011 2012 2013 2014 2015 2016 2017 Proximity mobile payment transaction value % change Note: point-of-sale transactions made by using a mobile device as a payment method; includes scanning, tapping, swiping or checking in with a mobile device at the point of sale to complete transaction; excludes purchases of digital goods on mobile devices, purchases made remotely onmobile decives that are delivered later on, and transactions made via tablets. Source: eMarketer, July 2013 1 When it comes to mobile payments, existing with this recently-introduced mobile payments information, and interpretations of it, abound. Some option. Meanwhile nearly 80 percent of iPhone interpretations are oppositional and some users and almost 75 percent of Android users complimentary. Many are very limited and self- completed their instore purchases with credit serving. The fact of the matter is, though, that as of or debit cards. this moment in time, most of the predictions How We Paid on Black Friday 2015 concerning when the widespread adoptions of payments made with digital devices instead of cash iPhone Users and cards would occur have been off the mark. Apple Pay2.7% Credit or Debit 79.2% Neither18.1% Some analyst firms that watch the industry have downgraded their forecast as is the case with the chart above from eMarketer.com. Other organizations Android Users tasked with reading the tea leaves related to this topic Mobile Wallet 2.0% may also want to consider adopting a more bearish Credit or Debit 73.5% INDUSTRY INSIGHT stance around mobile payments given the data from Neither24.4% the annual consumer feeding frenzy that now extends from Thanksgiving Day through Cyber Monday. Source: InfoScout 2015 Information gathered by the firm InfoScout on Black Low use levels of Apple Pay on Black Friday Friday indicates consumers are still in love with their 2014 were expected, since the service was just plastic. InfoScout tracked the use of Apple Pay and a month old and only available on the latest Android Pay compared to other forms of payment. iPhone model. However, the data coming in Their findings should silence any commentary that from InfoScout and others a year later seems suggests the current, dominant model for delivering to suggest that this tech-company-driven instore mobile payments is progressing. version of mobile payments delivery seems less than a hit with the consumer. Apple Pay Usage as a percentage of Apple Pay eligible transactions 6% If there is going to be a paradigm shift in 5% payments, then it is yet to come. Indeed, one 4% has to question whether the current efforts 3% being made actually represent progress. Using 2% Apple Pay as a test case and comparing year 1% over year use trends, it could be argued that 0% this type of approach is discouraging adoption. Nov DecJan FebMar AprMay June July AugSep OctNov 2014 2015 2015 Maybe we need to step back and shine a Source: InfoScout 2015 different light on our experience to date and Not only was use of Apple Pay low but, in fact, the some of what is unfolding in the present. percentage of consumers using Apple Pay reached an all-time low. InfoScout found that only 2.7% of Apple It is how Dr. Kuhn would have done it, looking Pay-eligible transactions were made via the service, a critically at certain assumptions in his field that number considerably lower than last year’s 4.9% Black may be leading away from the paradigm shift Friday total. that is needed for progress to be made. In the case of mobile payments, there is a set of red Android Pay use was even lower with only 2% of herrings that are impeding the movement forward toward options that the consumer will eligible transactions on Black Friday being completed find attractive enough to adopt. 2 Red Herring #1: The Mobile Wallet Metaphor If we know anything about U.S. consumers in particular, we know that technology which makes A search for the origins of the term “mobile wallet” life harder, takes more time to use and requires a returns 36 million hits. A cursory review of the first change in ingrained user habits dies a rather quick couple of pages of these results reveals no author to death. Thus, at a minimum, the idea of mobile attribute the creation of the term to, which is probably payments being the same as a mobile wallet that for the best. The term is a poor metaphor for doing adds to the complexity of life certainly has not been payments from a smartphone or wearable and is itself helpful to the adoption of either. It might have been an inherent barrier to adoption. better to search for a term that translated more into the digital rather than physical world given the Aside from the fact that the term speaks volumes about limitations and associations with the current choice. the primarily male tech industry lack of farsightedness – since mostly men carry wallets – consumers are not Why not think of the ability to make payments on a INDUSTRY INSIGHT asking for a mobile wallet. What they want is more smartphone the same way we do other services convenience and value-add when purchasing goods and offered on it? Currently there are various apps for service. Should the originator of the terminology be smartphones that do specific things – e.g., serve as discovered and interviewed, it is likely his intentions newsfeeds, flashlights, cameras, compasses, were mostly innocent. Likely his reasoning for choosing activity monitors, et al – but generally the owners of to create the metaphor was to offer consumers a these devices attribute the functionality to the conceptual bridge from how they frame payments device – e.g., my iPhone is also a flashlight, etc. – currently to a future that would offer them better and rather than to a specific app. easier ways to pay. The bridge, however, is rickety and does not connect the present to the future. This is actually what Apple wanted to achieve with Apple Pay; i.e., not the creation of another mobile The mobile wallets debuted to date do not replace wallet but rather the creation of a service delivered physical ones. In addition to a driver’s license and on an iPhone that would make that device even passport, there are an array of other things in physical more vital to its owner’s everyday life. wallets (e.g., gym membership card, insurance card, Unfortunately, the Passbook on iPhones was just metro pass, notice of allergies to certain medicines, etc.) too easily coopted as “wallet” and Apple, apparently, that cannot be easily put in the mobile version. So, great, could not avoid the temptation. Approaching now I have TWO wallets to keep up with, which is LESS payments as a “utility” has proven effective in not more convenient. fostering adoption. 62% Convenience 84% For example, Kenya uses a system called M-Pesa, 43% Reduce queue time 57% run by a company called Safaricom. Nearly every 24% consumer payment in Kenya, from utility bills to Prefer to carry less around with me 37% groceries, is paid for with a cell phone. How did an 23% Easier to use / no PIN numbers 31% economic and technological superpower like the 23% United States of America get left in the dust in this If I lost my phone I would be aware more 33% quickly than if I lost my credit card category of technology by an East African nation 21% I always remember to carry my mobile 33% phone but not my cards with a small population and limited technological 8% I think it would be more secure 12% development? All Those who have / would consider / would definitely use mobile phone technology 3 In part because of the difference in the state of the come even more rapidly for whatever new, shiny payment’s infrastructures of the two countries with the option is being proposed. U.S.A. having a complex payments ecosystem and Kenya Reasons for lack of interest in using smartphone having hardly any at all. However, it seems significant to to make in-person payments point out that Safaricom does not primarily pitch M-Pesa as a mobile wallet but rather as a payment Don’t see any reason to switch from 58% cash or payment cards 62% utility that makes the lives of average Kenyans easier to Don’t want to store sensitive 62% navigate.