The ‘Pays:’ Usage Remains a Struggle

When it comes to mobile-payments services like Apple Pay and Samsung Pay, the payments industry appears to be seeing adoption. But it could be years before it sees steady usage.

The adoption picture, as defined by cardholders loading a card, is improving for Apple Pay, according to the latest numbers from Phoenix Marketing International, a Rhinebeck, N.Y.-based research firm. As of March, 18% of credit card holders had loaded a payment card into their Apple Pay wallet, up sharply from 14% in October and from 10% a year earlier.

The adoption rates for Samsung Pay and Android Pay were 12% and 11%, respectively. These two wallets were six months old in March, so they are both at roughly the same rate of adoption that the older Apple Pay was when it had been in the market that long, says Leon Majors, a senior vice president at Phoenix.

And 92% of Apple Pay users have performed at least one transaction with the wallet, according to Phoenix’s research. The same percentages for Samsung Pay and Android Pay are 91% and 84%, respectively.

But how many are using the services every day or every week—in other words, as frequently as they might use a plastic card? Majors says that’s another story. Setting aside in-app purchases, there simply aren’t enough places right now where consumers can buy things with the wallets. “They’re getting adoption but they can’t get usage,” says Majors.

Internationally, the picture may be brighter. Worldwide mobile-wallet usage is expected to reach $95 billion by 2018, up from $35 billion last year.

In the United States, there just aren’t enough places that can accept the “Pays,” Majors says. Indeed, the only U.S. retail operation where consumers can count on using any of the “Pays” at all registers in all stores in the chain is Whole Foods, Majors says. Overall, he estimates that just 8% of all points of sale have near-field communication capability turned on, up from 5% six months ago. NFC is the radio-transmission technology that links Apple Pay and Android Pay to POS readers.

Samsung Pay works with mag-stripe readers but awareness of that capability is lacking. Phoenix’s research found 83% of Samsung Pay adopters were using NFC, while 59% were using the wallet’s mag-stripe mode.

Forget trying to total up transactions on any wallet. “We can’t count transactions yet,” says Majors. “They’re too sparse to count.”

The problem all of the “Pays” confront is that they’re trying to win usage at the same time merchants are scrambling to install, certify, and switch on EMV chip card acceptance in their stores. For now, that all-consuming effort leaves little time for other modes of payment, Major says. “The technology shift needed to support [mobile wallets] is happening in slow motion,” he says. “It’s just going to take a long time.”

Any transformation of the point of sale takes longer than anyone expects, but Majors says the shift to NFC could require “a minimum” of five years to complete “the way we’re going.”

The good news is that awareness, the first step toward adoption and usage, is strong for all of the “Pays.” Even wallets that haven’t hit the market yet are gaining consumer attention, according to the Phoenix research, which surveyed more than 3,000 credit card holders.

Apple Pay tops the awareness table at 71%, followed by PayPal at 64%, Samsung Pay at 57%, and Android Pay at 49%. Google Wallet, which has been overhauled for peer-to-peer payments, is a narrow-purpose product but still clocks in at 67%, second only to Apple Pay.

Meanwhile, JPMorgan Chase & Co.’s Chase Pay wallet, which isn’t expected to launch until this summer, boasts a 29% awareness rate, as does Wal-Mart Stores Inc.’s Walmart Pay. Target Corp.’s Target Pay service, which remains officially unconfirmed, still checks in at 22%, followed by CurrentC at 12%. CurrentC is a wallet developed by Merchant Customer Exchange LLC, a consortium of major U.S. retailers. It is undergoing a beta test in Columbus, Ohio.

—John Stewart