The Fed Finds Rising Mobile-Payments Adoption, But Big Hurdles Hinder Usage

The number of mobile-payments users in the United States is growing steadily, but most mobile-phone owners still find other payment methods more convenient, and the frequency of payment use with phones is still low.

These are among the conclusions of a Federal Reserve consumer survey conducted in December that also canvassed users about mobile banking and shopping habits. The Fed, which released the survey’s results last week, conducted similar surveys in 2011, 2012, and 2013.

Some 22% of respondents with access to a mobile phone said they had conducted at least one mobile payment within the prior 12 months. That’s up from 17% in 2013 and 15% in 2012. Notably, the number of mobile-payments adopters has nearly doubled since the 2011 survey, when 12% reported having made at least one payment in the previous 12 months.

Among age groups, adoption has doubled among those 45 to 59, from 8% in 2011 to 16% in 2014, and nearly doubled among those 30 to 44, from 16% to 31%. As might be expected, 18-to-29-year-olds are the most numerous users, with adoption growing from 20% to 34%.

For the survey, the Fed defined mobile payments as including bill payments, donations, and peer-to-peer transfers as well as purchases online or in-app and in stores. Bill payment is the most common payment type, at 68% of users, followed by online or in-app transactions (54%), in-store payments, and P2P payments (36%). Attracting much less adoption are payments for parking, taxi, or public transit (16%), payment by text message (11%), and overseas remittances (11%).

With services like Google Wallet, PayPal, and Apple Pay battling it out for the point-of-sale market, it turns out quick-response (QR) codes remain the most popular way of triggering a payment, used by 31% of mobile-payments users who have a smart phone. Still, that proportion has slid 8 percentage points from the 2013 result. Making a tap or wave payment, meanwhile, scores a 14% adoption rate. Use of a mobile app that doesn’t require a QR scan or a tap comes in at 22% adoption.

When asked which payment service they used, respondents most often cited PayPal (43%), followed by Starbucks (11%) and Google Wallet (9%). Apple Pay, which was launched only in October, scored a 5% adoption rate. However, fully 43% of respondents did not answer this question.

The most popular funding method is debit cards, cited by 55%, followed by credit cards (51%) and transfers from a bank account (41%) or from an account at a non-bank company, such as PayPal (15%). Prepaid cards scored an 8% adoption, while carrier billing came in at 4%.

While the steady rise in adoption may lend momentum to mobile-payments backers, the survey did reveal some startling negative results, as well. These indicate mobile-payments services will have to work hard to win mass adoption any time soon.

Perhaps that most prominent of these results is the most frequently cited reason given by respondents who don’t use mobile payments. Some three quarters of these consumers said they eschew mobile because paying with cash or a card is easier. Fully 59% said they see no benefit, and an equal proportion cited security concerns. When asked what features might induce them to start using mobile payments (such as rewards), nearly two-thirds cited the answer that said: “None, I don’t want to use mobile payments.”

At the same time, while the overall adoption rate has risen 10 percentage points in four years, the frequency of use is low. For all users of mobile payments, the median frequency of use in the month before the survey was twice.

For “Consumers and Mobile Financial Services 2015,” the Fed commissioned an online survey of 4,965 consumers, of whom 2,925 completed the questionnaire. Eighty-nine percent of these consumers owned or had access to a mobile phone.