Conventional wisdom in the payments business has been that the advent and spread of contactless cards would pave the way for wider use of mobile payments. But research released this week indicates that may not be the case. Indeed, far from serving as the training wheels for mobile payments, new contactless plastic could tempt mobile-phone users away from using their devices for purchases.
“A lot of [consumers] are excited and interested in using contactless cards,” says Jaclyn Holmes, director of research at New York City-based Auriemma Consulting Group. So much so, she adds, that the ease of tapping and the familiarity of plastic could keep mobile-phone owners from using a mobile wallet.
The firm’s latest Mobile Pay Tracker surveyed just over 2,000 consumers in January and February who were eligible to use Apple Pay, Google Pay, or Samsung Pay. While these consumers are understandably enthusiastic about the experience of contactless connectivity at the point of sale, it’s unclear whether that sentiment will translate into greater use of mobile wallets, the study says. Some 18% of the surveyed consumers said contactless cards were “better” than mobile wallets, while nearly two-thirds said the two methods were “about the same.”
To be sure, the rollout of new contactless cards meeting new near-field communication standards is far from complete. Major issuers like JPMorgan Chase & Co. have only begun pumping out the cards in recent months. Visa Inc. has predicted there will be about 100 million cards in circulation in the United States by the end of the year. These are so-called dual-interface cards, which can be inserted into a chip reader as well as tapped at a terminal.
The simplicity and versatility of contactless transactions with cards are easily underestimated, Holmes says. “Cards are a much more natural experience” for consumers, she says. The Auriemma survey, in fact, indicates 55% of respondents who use mobile wallets agree that contactless-card transactions are “faster” than mobile payments.
And, while merchants are still installing new terminals that can work with newer contactless standards, that doesn’t pose a barrier for cards, she points out. “That has slowed mobile payments, whereas with contactless [cards], if it doesn’t work, it doesn’t matter, you just insert it,” she says.
Meanwhile, while costs for dual-interface cards are still higher than for contact-only plastic, the gap has been narrowing. Dual-interface cards are now running around $1 each, less with larger volumes.
But one factor that has been missing so far but could lend impetus to mobile payments is rewards and other incentives. Apple Inc. has until recently been notably reluctant to promote Apple Pay with incentives, but that seems to be changing with its new Apple Card alliance with Goldman Sachs Group Inc. Set to debut this summer, the new digital Apple Card, which will run on the Mastercard network, will offer 2% cash back on all purchases except those directly from Apple, which earn 3%. If the cardholder uses a plastic version, the reward is just 1%.
“For people who don’t have an issuer incentivizing mobile payments, contactless cards will suffice,” Holmes says. “Whenever we ask what would motivate you to use a mobile payment, it’s always incentives or rewards.”