Maintaining the Mobile Payments Thesis

Mobile payments, Apple Pay in particular, have come under some criticism lately as reports indicate adoption is slower than some expected. A recent report by the Wall Street Journal cited estimates of 13% of iPhone owners globally have tried Apple Pay. I’m not going to split hairs on this number but data and research we have suggests a global number of 15%. I take these two data points to be accurate and in the ballpark of global adoption of Apple Pay.

As with most reports, they are privy to the topline numbers but often lack the deeper context of full research data or market insight. What I won’t dispute is that adoption remains low due to reasons like lack of retailer support, consumer awareness, security concerns and, perhaps primarily, the weight of behavioral debt. The last point is made clear in a mobile payments study we did at Creative Strategies last fall where 40% of consumers stated their biggest barrier to adopting mobile payments is, “It is still easier to use my credit card.” As I’ve stated many times when outlining how new technologies are adopted, old habits die hard.

There are some deeper market insights we look at in order to see the true potential of a particular technology. One is satisfaction, an area where Apple Pay crushed the competition with a 92% satisfaction rate when its closest competitor was 66% in Android Pay. But, more importantly, we studied the sentiment of those using mobile payments of Apple Pay, Android Pay, and Samsung Pay. Overall, once people start using one of these solutions, they want to start using them everywhere. This is always a good sign for a feature. It creates such a positive experience you want to use it more and get frustrated when you can’t. A good feature raises your expectations of an experience. That is exactly what mobile payments do.

Mobile payments and support at retail is inevitable. It is simply a matter of time before you can pay with your smartphone everywhere you go. It will take time for consumers to embrace this but the research we have suggests that, once they do, it will become a habit quickly. While companies like Apple, banks, credit card companies, and retailers can all do a better job communicating the benefits and driving greater awareness of mobile payments, there is another angle I think may help — support on the web for things like Apple Pay.

I tweeted last night that Apple Pay is as magical on the web as it is at retail. While finding Apple Pay on the web is still rare, when it is found and you are looking at an item, I’d argue Apple Pay availability dramatically increases purchase conversions. I had the powerful experience last night of a friend on Twitter sharing a t-shirt he had designed and the link to purchase it. From my iPhone while laying in bed, I checked out the design and noticed Apple Pay was supported for the transaction. That single feature was the catalyst to get me to convert the purchase right then and there. The inclusion of Apple Pay made the transaction frictionless. I otherwise would not have spent the time to enter my credit card information and billing/shipping address from my iPhone to complete that purchase. If I wanted it bad enough, I would have gone back to my PC in a day or so but it’s entirely possible I would have forgotten by then. So, in this case, Apple Pay support encouraged a spur of the moment purchase which may not have happened otherwise.

This experience combined two powerful things: a social recommendation and ease of transaction via Apple Pay. The social recommendation increased my interest in the product and the easy checkout with Apple Pay increased my willingness to complete the transaction. These will be critical parts of the mobile commerce era, which will be significantly more interesting and lead to a boom of new opportunities never found in the desktop e-commerce era.

Interestingly, I came across a report from CPC Strategy which did some research on Facebook ads and transaction completion. While 60% of people who use Facebook regularly had not clicked on an ad in the past 30 days, a surprising 33% had. That’s a surprisingly good transaction rate against the industry standard. The stat I found more interesting was 26% of those who had clicked on an ad on Facebook completed a purchase. Again, a surprisingly high conversion rate.

While the report does not break out the percentage of these clicks which took place on mobile over desktop, we know mobile usage of Facebook is significantly higher than desktop usage so it’s safe to assume a good portion of those clicks and transactions took place via a mobile device. Part of my thesis on mobile commerce/payments includes the support of Apple Pay, Android Pay, Samsung Pay, or Amazon Payments into the integration of ads which I believe can boost that 26% number even higher.

As more ads and commerce sites support mobile payment methods like Apple Pay, Samsung Pay, Android Pay, Paypal, and Amazon Payments, I’m convinced that, when they are paired with social recommendations, we will see conversation rates increase dramatically.

It truly is shocking how much friction has existed in e-commerce for so long. This is one of the main reasons e-commerce is still only 11-12% of US retail commerce annually. It has been stuck in this range for years. I’m convinced that, once technologies like Apple Pay, Android Pay, etc., become the standards, e-commerce’s percentage of retail will grow radically and quickly.

In case you are interested, here is the direct link to the Facbeook ads study I mentioned.

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Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio

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