Why are most of us still using credit cards?
Sometime around 2013, the buzz in tech world was that very, very soon smartphones would be used for payment in stores and we could do away with physical credit cards. Sure enough, shortly after, in 2014 one half of that promise was delivered — Apple Pay was launched, with Android Pay following closely after.
But three years later, why does it seem that everyone is still using physical cards and cash?
Consumer data from 2017 shows that for regular purchases, shoppers are turning to contactless mobile payments only 2% of the time. So, what happened? Why has adoption been slow?
We believe a few key issues around the user experience of contactless payments are the main culprits.
1. “I still need my wallet”
Even if shoppers can ditch the credit cards, many people still carry a driver’s license, insurance card, Costco card, and the like. Also, very few ATMs are compatible with Apple Pay or Android Pay which means if they want cash, a debit card is still needed. Smartphone payments may allow them to shed a few cards and get their wallet a touch slimmer, but the ultimate result isn’t a life changer. People are still carrying their wallets, and it’s difficult to adopt a new behavior when the old behavior is still easily within reach.
2. “It’s not very different”
One potential value of contactless payment is a faster and easier experience at the register. Maybe you are a quick draw with your phone, but most likely, pulling out a wallet isn’t much (if at all) slower than a phone. Whether using a smartphone or credit card, paying at a register involves taking something out of a pocket or purse, tapping or swiping, and making choices on the screen of a POS terminal. These experiences share more similarities than differences, and the differences are minimal in terms of convenience and time saved. It’s hard to transition users to an experience that appears to offer minimal benefit over what exists now.
3. “What if it doesn’t work”
Apple recently announced that by the end of 2017, 50% of retailers in the U.S. will accept Apple Pay. While that is encouraging news, this also means that half of retailers won’t. Once a shopper has the frustrating experience of trying to touch a phone to a credit card machine only to find out that it’s not compatible, they are now a little less likely to try the next time. Additionally, our user research on the topics of retail, technology, and devices has revealed most users are concerned with clicking the wrong button or navigating to the wrong screen while trying to pay at the register. When faced with uncertainty and concern around a new experience, many shoppers will retreat to the safety of a sure thing.
4. “Is it actually more secure?”
The topic of security and privacy arises in many of our user research projects. The desire to keep information protected and the fears of being hacked or falling victim to identity theft are front of mind for many of our research participants. So, it makes sense shoppers would see value in a smartphone that keeps cards protected behind a passcode or fingerprint scans and that card numbers can’t be accessed even if someone manages to unlock the phone. From a technical standpoint, the smartphone is more secure than carrying around a wallet full of credit cards and IDs. However, the consumers’ perception of security matters much more than the reality of security. From our experience, the average consumer simply doesn’t have a strong understanding of the technical details. They hear in the news that phones can be hacked and nothing digital is “truly safe,” so many still feel that keeping credit cards in a wallet is just as secure. We also hear the “all my eggs in one basket” mentality when discussing the idea of only using your phone for payments. The thought of losing a phone is already scary for most consumers, and the idea of also losing the only way to pay for things just adds more fear. Contactless smartphones payments aren’t the first and won’t be the last experience to suffer adoption due to consumer’s lack of understanding.
What the future holds
When companies want to shift their users away from an existing experience that doesn’t pose a major pain point, it can be a bit of an uphill climb. And when the new experience being offered isn’t significantly better than what exists now (some would argue no better in this case), it’s no surprise that adoption is slow. Add the fact that this experience takes place in a setting where a user may be holding up a line or in a rush means the new offering, which presents some concerns and uncertainty, is even less appealing.
However, we aren’t saying that this technology won’t ever be ubiquitous. Use of Apple Pay in stores increased 50% from 2015 to 2016, and contactless payment with a phone is much more popular in parts of Asia than in the U.S. But for now, the promise to be free of those little plastic rectangles that have been around since the 50’s still hasn’t come to fruition for many consumers who aren’t sold on the experience.
Ultimately, changing how the point of sale works won’t revolutionize how we shop — it’s changing where the point of sale is. Companies exploring ways to enable customers to purchase and receive items in new ways will likely be more successful in changing their users’ behavior.
- Starbucks has already expanded the purchase experience beyond the store by allowing customers to order on a phone and then grab their drink when they walk in. https://www.starbucks.com/coffeehouse/mobile-order
- Amazon is attempting to launch a new store concept which has no registers. Instead, items you place in your cart or basket are tracked and charged to your Amazon account when you walk out. https://www.amazon.com/b?node=16008589011
References for some of our claims:
http://blog.txn.com/apple-pay-on-the-rise/
http://www.pymnts.com/news/mobile-payments/2016/apple-pay-adoption-usage-2016/
http://www.gfk-verein.org/en/compact/focustopics/mobile-world-without-mobile-payments
