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Digital Wallet Trends

Posted on 02. Jan, 2018 by in android, Cloud, Gaming, internet, iPhone, mobile, Payment processing, smartphones, Uncategorized

Consumer Digital Wallet Trends
Digital Wallets Still Struggling to Gain Wider Adoption

Overview: 451 Research’s latest ChangeWave survey results show a slight uptick in demand for digital wallets following two consecutive declines. That said, we generally see an improvement this time of year, but the increase is not as large as the past two Septembers.

The September survey of 3,840 primarily North American consumers from 451 Research’s Leading Indicator panel focuses on digital wallet preferences, current use and person-to-person payment apps.

Demand for Digital Wallets

A total of 26% of smartphone owners say they’re likely to use digital wallets over the next 90 days (16% Very Likely; 10% Somewhat Likely) – up 1 point from June.

Although we typically see an uptick in demand in September, this increase is not nearly as significant as the last two.

According to Jordan McKee, 451 Research Principal Analyst – Payments: Digital wallet likelihood of use has effectively plateaued since the launch of Apple Pay. While merchant acceptance continues to broaden, the current digital wallet value proposition has failed to resonate with a wide swath of the population, who are still content with incumbent forms of payment like cash and cards.”

Owners of iOS (34%) are twice as likely to say they will use digital wallets in the future compared to users of Android-based devices (17%).

Competition Among Services

Among those planning to use digital wallets, Apple Pay (55%; up 1 point) remains ahead of the competition. PayPal (39%) is unchanged, but higher than a year ago. Visa Checkout (8%; up 1 point) has moved into third place overtaking Google’s Android Pay (6%), which has dropped 3 points from previously.

Chase Pay (5%) is up 1 point, while Samsung Pay (5%), Amex Checkout (5%) and Capital One Wallet (3%) are unchanged.

McKee notes, “Android Pay has exhibited a downward trend in planned usage since peaking in September 2016. We attribute this to the fragmentation of the Android payment ecosystem, which counts multiple alternatives like Samsung Pay and bank-branded wallets.”

Not surprisingly, Apple Pay (75%) leads among iOS users, followed by PayPal (33%).

Digital Wallet Preference by OS

PayPal (57%) is the top choice among Android owners, with Android Pay (23%) in second place. Samsung Pay (17%) also registers among Android owners.

Frequency of Use. A total of 48% of respondents who have used digital wallets over the past 90 days say they’ve used them weekly or more often – up 1 point since previously.

More iOS owners say they use digital wallets weekly or more often (51%) than Android users (39%).

Frequency of Digital Wallet Use – iOS vs. Android

Customer Satisfaction

Apple Pay leads in satisfaction ratings among current users, with 68% saying they’re Very Satisfied, while PayPal (60%) remains in second place.

A total of 44% of Visa Checkout users say they’re Very Satisfied.

Reasons For Not Using Digital Wallets. Among respondents unlikely to use digital wallets, 34% say they have No Need/Not Interested. Three-in-ten (29%) cite Security Concerns as the most important reason, while another 22% say they Prefer Traditional Methods of Payment.

Android users (32%) are more likely than iOS (27%) to say Security Concerns are preventing them from using digital wallets.

Perceptions of Security

Consumers continue to have concerns about the security of digital wallets vs. credit cards. While a total of 30% of smartphone owners believe digital wallets are more secure than traditional credit cards, another 31% still say they’re less secure – a net 1 point worse than previously.

According to McKee, “Card-issuers and wallet providers alike must take it upon themselves to educate the market on the security advantages of digital wallets. Marketing messages should focus on putting complex wallet technologies like tokenization into language cardholders can understand.”

When we look at security perceptions results by OS, Apple iOS users (37%; up 2 points) remain more likely than Android owners (21%; unchanged) to say digital wallets are More Secure.

Person-to-Person (P2P) Apps

One segment of the digital wallet space seeing more growth is person-to-person (P2P) payments, likely driven by additional competition from banks and well-known social media platforms integrating payment options into their existing services. Half (50%) of all smartphone owners say they’ve used person-to-person apps to send or receive money from friends, family and colleagues.

Survey results show PayPal well ahead of competitors in this space, with 69% of those who have used these apps saying they used PayPal. Nearly one-third (31%) have used their bank’s app and 10% Venmo.

In terms of person-to-person apps, McKee says, “The P2P space is one of the most active pockets in digital payments at the moment. While providers like Square and Venmo have made recent moves to parlay their apps into consumer-to-business payment methods, the large US banks are working to build a formidable competitor in Zelle.

The long-term goal for all P2P providers is to figure out how to generate revenue off of what has traditionally been a money-losing service.”

Bottom Line

Survey results show a slight increase in demand for digital wallets – something we typically see each September. That said, the improvement this September is not nearly as strong as the previous two.

Among planned digital wallet users, Apple Pay is ahead of the competition and is showing an uptick. Second place PayPal is holding steady. Visa Checkout is improved and has overtaken Android Pay, which is experiencing a dip in demand.

Apple Pay also leads in satisfaction ratings among current users, followed by PayPal and Visa Checkout.

The survey shows a slight weakening in the perceptions of digital wallet security vs. credit cards, and security concerns remain a key obstacle among those unlikely to use digital wallets – especially Android owners.

The P2P payment market continues to expand with more banks and social media platforms integrating P2P payments into their existing services. PayPal is by far the most-used in this space, followed by individual bank apps and Venmo.

McKee concludes, “Digital wallet adoption continues to be relegated to a subset of the population in part because there hasn’t been an event that has galvanized the market since Apple’s entry into the space three years ago. After causing an initial stir that sparked the first wave of consumer adoption, Apple and its peers have remained focused on incremental advancements, like one-off merchant partnerships and small feature improvements.

This has been enough to keep existing users engaged, but not enough to prompt another wave of significant adoption. It is this next wave of consumers that pose the greatest hurdle for wallet providers because of their content with cash and cards, which work well and are accepted ubiquitously.”

Summary of Key Findings

Slight Improvement in Demand for Digital Wallets

26% of smartphone owners say they’re likely to use digital wallets over next 90 days – up 1 point from previously
We typically see increased demand in Sep, but this uptick is not nearly as steep as the past two Septembers
Intended use is highest among iOS users (34% iOS vs. 17% Android)
Apple Pay Leads in Overall Demand

Apple Pay (55%; up 1-pt)
PayPal (39%; unchanged)
Visa Checkout (8%; up 1-pt)
Android Pay (6%; down 3-pts)
Frequency of Use
48% of digital wallet users say they’ve used them weekly or more often
iOS owners (51%) more likely than Android (39%) to have used weekly or more often
Satisfaction Ratings
Apple Pay (68% Very Sat)
PayPal (60%)
Visa Checkout (44%)
Person-to-Person (P2P) Apps
50% have used P2P apps
69% PayPal
31% Their Bank’s App
10% Venmo
Security Concerns

Digital Wallets vs. Credit Cards
30% think mobile payments are more secure than credit cards and 31% less – a net 1-pt worse
More Secure ratings are higher among iOS users (37%) vs. Android (21%)
Reasons for Not Using Digital Wallets
34% of unlikely users say they have No Need/Not Interested
29% Security Concerns
22% Prefer Traditional Methods of Payment

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