Mobile wallets like Apple Pay are catching on, but slowly

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Mobile payments are gaining traction, but the process has been slow in the early going.

A new study from Auriemma Consulting Group's Mobile Payment Tracker indicates that more than 25% of all eligible users have tried Apple Pay, Android Pay, and/or Samsung Pay. That figure is down from 42% who had tried Apple Pay in July 2015. This decline is likely due to newer wallets such as Android Pay and Samsung Pay that have not had as much time to catch on among consumers.

The size of mobile wallet purchases is relatively low, but user engagement is substantial. Approximately one-third of users who made a mobile payment in the last week said it was worth $25 or less. This suggests that consumers could use mobile wallets for smaller purchases rather than larger, more expensive products that they would typically put on a card.

But many consumers appear to be using mobile wallets frequently for smaller purchases, as 31% of users made a mobile payment whenever the opportunity arose. And 17% of users' discretionary spending occurs through mobile, which indicates that mobile payments provide value once users test them.

Currently, less than half of all smartphones owned in the U.S. are eligible for mobile wallets, according to Auriemma. But that potential user base should increase as smartphone upgrade cycles progress.

Furthermore, 39% of eligible users would use mobile wallets more frequently if more stores accepted them. As more locations install NFC-enabled terminals that process mobile payments from most wallets, then more consumers could adopt them.

And loyalty or rewards programs could give consumers a reason to adopt the wallets and form habits around them, as many of these programs reward customers for frequent use.

BI Intelligence, Business Insider's premium research service, forecasts that more than half the U.S. population will try mobile payments by 2020, and volume will swell to $503 billion by 2020 at a five-year compound annual growth rate of 80%.

Mobile payments are becoming more popular, but they still face some high barriers, such as consumers' continued loyalty to traditional payment methods and fragmented acceptance among merchants. But as loyalty programs are integrated and more consumers rely on their mobile wallets for other features like in-app payments, adoption and usage will surge over the next few years.

Evan Bakker, research analyst for BI Intelligence, has compiled a detailed report on mobile payments that forecasts the growth of in-store mobile payments in the U.S., analyzes the performance of major mobile wallets like Apple Pay, Android Pay, and Samsung Pay, and addresses the barriers holding mobile payments back as well as the benefits that will propel adoption.

Here are some key takeaways from the report:

• In our latest US in-store mobile payments forecast, we find that volume will reach $75 billion this year. We expect volume to pick up significantly by 2020, reaching $503 billion. This reflects a compound annual growth rate (CAGR) of 80% between 2015 and 2020.
• Consumer interest is the primary barrier to mobile payments adoption. Surveys indicate that the issue is less the mobile wallet itself and more that people remain loyal to traditional payment methods and show little enthusiasm for picking up new habits.
• Integrated loyalty programs and other add-on features will be key to mobile wallets taking off. Consumers are showing interest in wallets with integrated loyalty programs. Other potential add-ons, like in-app, in-browser, and P2P payments, will also start fueling adoption. This strategy has been proved successful in China with platforms like WeChat and Alipay.

In full, the report:

• Forecasts the growth of US in-store mobile payments volume and users through 2020.
• Measures mobile wallet user engagement by forecasting mobile payments' share of their annual retail spending.
• Reviews the performance of major mobile wallets like Apple Pay and Samsung Pay.
• Addresses the key barriers that are preventing mobile in-store payments from taking off.
• Identifies the growth drivers that will ultimately carve a path for mainstream adoption.

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