DES MOINES, Iowa—Will digital wallet “clutter” hurt adoption of mobile payments?
It could, according to TMG, which fears that as more retailers introduce their own wallets tied to their store loyalty programs, all those different apps will confuse consumers, leaving many to opt for the payment method they have known for years—the plastic card.
TMG also thinks that the retailers’ rewards-driven digital wallets will require CUs to offer incentives to encourage use of the digital wallets they offer.
“In a day’s time I go to Starbucks for my coffee and pay with my Starbucks mobile app, but then I go to Walmart and pay with their app, and now Target is coming out with Target Pay. The entire digital payments landscape is getting fragmented and confusing,” said Brian Day, director of digital products. “It gets so confusing that consumers just do what they do today, and that is pay most of the time with their plastic.”
All of the store apps emerging may have a negative impact on the major digital pays—Apple Pay, Google Pay and Samsung Pay, asserted Jeff Falk, director of payments product management.
Brian Day, TMG
“I think we will see consumers have three to four payment apps on their phones tied to loyalty programs at places they always go, and then at all the other places they shop they will pull out plastic,” said Falk. “The retailers have a strong incentive to offer attractive programs to drive loyalty. The generic apps, like Apple Pay, may try to introduce some lightweight loyalty programs. The sweeter offerings for consumers, however, will be driven by the retailers.”
Consumer Confusion
When digital wallets debuted years ago it was thought that the issue of consumer confusion and clutter in the digital payments space would come from the different payment methods, such as barcode or NFC. But all the different retailer apps that are in the market and on their way present a much bigger roadblock to the overall adoption of digital wallets, asserted Day.
Day noted that the Merchant Customer Exchange failing to have success with CurrentC—a digital wallet that would have been used by a large group of big-box merchants—has sent retailers down the path of developing their own solutions tied to their own loyalty programs.
Day contends that the major digital payment options, such as Apple Pay, are simpler for consumers to use at the point of sale as they just tap and go. With store wallets, Day said, consumers have to wake up their phone, find and choose the specific store app, possibly bring up a barcode, and more.
“A lot more steps,” said Day. “Most cardholders don’t want to do that.”
While that may be a small roadblock in the way of store wallets, the loyalty programs often get the user past that obstacle—and Day thinks merchants will find ways to simplify use of their digital tools. Day believes more merchants will develop methods to “check in” users as soon as they walk into the store to not only streamline checkout but also offer incentives while people are shopping.
Jeff Falk
“Ultimately this fragmentation, all of the different mobile payment apps, is creating consumer confusion,” said Day. “Unless consumers see clear advantages to using something they will continue to pay the way they have paid for years. So all this noise is hurting the adoption of mobile payments.”
Lost Revenue
The danger for credit unions, said Day, is as these store offerings emerge and capture greater share of card transactions with their attractive loyalty programs, credit unions will lose interchange revenue. Day suggests that credit unions consider adopting loyalty programs to drive usage of their digital wallet offerings.
“Credit unions invested in their digital wallet offerings should consider giving members incentives for using mobile payments,” said Day, adding that programs that drive “more taps” as opposed to higher dollar spend are best for changing cardholder behavior.