Nearly half of millennials have used a mobile wallet (SQ)
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About 45% of millennials (those aged 18-34) have made an NFC payment, according to a Square survey of 1,000 consumers. In contrast, just 26% of adults 35 and older have done so.
The high adoption rate among millennials is a good indicator of where adoption is headed as digital natives grow as a share of the general population, bolstering our bullish in-store mobile payments forecast: We expect mobile payments to grow at s compound annual growth rate (CAGR) of 80% through 2020, to reach $503 billion.
Android is beating iOS in terms of usage. About 67% of Android users who also use a mobile wallet say they make payments with their phone more than once a week, compared with 56% of iOS users. We think Samsung Pay may explain why Android is doing better.
In addition to NFC, Samsung Pay uses a technology called Magnetic Secure Transmission (MST) that enables payments to be made at legacy magnetic stripe terminals. That means that Samsung Pay can be used almost everywhere, while Apple Pay acceptance among merchants is still limited.
Marketing campaigns focused on the security of mobile payments could drive up adoption. Of the consumers surveyed, 77% have not used mobile payments, and of that group, about half cited security as the primary reason.
However, the top mobile wallets on the market are perhaps more secure than chip payment cards because they authenticate not only the device being used for a transaction, but also the person using the device through fingerprint scanning. Additionally, the payment card number is tokenized, which means that it cannot be obtained and used for fraudulent transactions. Marketing campaigns focused on eliminating that consumer knowledge gap could be highly effective.
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, senior research analyst for BI Intelligence, Business Insider's premium research service, 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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