Monday , December 10, 2018

Digital Wallets Are Not Yet Ready for Prime Time, But Are Getting Closer, a Report Says

Though digital-wallet adoption among consumers may have paused this year, merchants continue to prep for the electronic payment, according to “The Next Phase of Digital Wallet Adoption,” a report commissioned by JPMorgan Chase & Co.

Conducted by Forrester Consulting, a unit of Forrester Research Inc., the report found the fraction of consumers who prefer to pay with digital wallets, which Chase defined as a non-cash payment made with a smart phone or other device acting as an electronic wallet, was 14% in June, compared with 15% in October 2016.

Those likely to use a digital wallet in the next 12 months was 41% in June, a slight improvement from 39% in October. Merchants that accept digital wallets increased to 37% from 36%. Forrester surveyed 1,500 consumers and 800 business executives.

Merchants continue to prepare, though there is some hesitation. Of small businesses surveyed, 42% say one of the biggest barriers to adoption is their customers are not asking to use digital wallets. For large businesses, the top concern—48%—is the upgrades would be too costly.

Overall, however, 55% of merchants say they are likely to upgrade their POS systems to accept digital wallets in the coming months.

“Just like with any new investment, businesses need to weigh costs against benefits,” Shaun Abraham, vice president of market intelligence at Chase Merchant Services, says in an email. “As the industry solves for the ‘chicken-and-egg’ dilemma of consumer adoption and merchant readiness, we believe the decision to upgrade [point-of-sale] systems will become easier to make.”

Consumers, too, look for incentives to use digital wallets. Of those labeled power users, people who use a digital wallet weekly or daily, 57% say having an order-ahead-and-pay feature would motivate them to use a digital wallet. Fifty-four percent of light users, who use digital wallets infrequently to monthly, want that feature, compared with 25% of non-users.

Other top feature requests were self-service pay at the table, the ability to use coupons and redeem rewards, and more and better security features in comparison to physical credit and debit cards.

This suggests that, when using digital wallets, consumers want them to make their purchasing experience easier, Abraham says. “No matter the type of user, capabilities that make life easier are always in demand,” he says. “In particular, convenience and speed are the types of benefits many consumers seek in making the transition from physical to digital wallet solutions.”

Sixty-seven percent of power users expect merchants to accept digital wallets online and 55% expect in-store acceptance. Light users are not far behind at 58% online and 50% in store. Non-users had lower expectations, at 22% online and 21% in-store.

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