Mobile Payments Growing but Still More Hype than Reality

Mobile payments -- as in buying things in a retail store with a mobile device -- still appear to be years away. Two weeks ago the IAB and InMobi released survey data that showed a range of payment and financial-related activities in mobile.

The survey, conducted in Q1 this year with roughly 1,200 US adult respondents, showed that there were pockets of mobile-financial activity: people capturing coupons, buying digital content and paying selected bills via smartphones. But the road to in-store mobile payments adoption is much longer (say 3 years or more).

In contrast to other types of "mobile payments" and financial services, mobile banking has taken off more rapidly than financial institutions anticipated. However mobile banking is really a case of people accessing information via tablets and smartphones that they already get from a PC. There's essentially no new behavior here, with the exception of mobile deposits (not yet widely performed). 

Are you aware of any mobile financial services features from your bank?

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Source: IAB, InMobi (n=1,242 US adults)

Capturing and redeeming mobile coupons was the most popular financial-related activity among this pool of respondents (57%). There's no surprise in that finding; mobile coupons are hugely popular.

There's also a significant amount of mobile bill paying (probably credit-card bill paying) according to the survey (46%). Mobile phone bill payment is also popular (42%). 

In terms of in-store/offline mobile payments, 34% of these respondents said they had conducted such a transaction. This number is probably higher than the "real" number if we were able to look at a nationally representative sample of mobile users. I suspect the number is much closer to 10% or 15% perhaps (unless everyone is talking about a loyalty app such as Starbucks).  

Have you ever used your mobile phone to make a payment? Screen Shot 2013-04-22 at 2.02.33 PM

Source: IAB, InMobi (n=1,242 US adults)

It would also be useful to get some additional insight into what "Paid a business for real-world goods/services by mobile" actually means. Unfortunately the survey doesn't further unpack the finding. For example, is it PayPal usage; is it use of a credit being accepted or read by a Square dongle? Is it a loyalty app, as I suggest above? 

Among financial-related apps, PayPal is easily the leader. (The company is now rolling out its in-store payments system through the Discover network.) In the chart below 37% of survey respondents said they had PayPal on their phones. The survey asks about "downloads" rather than active usage. Thus we don't know how often or whether people actually use these apps. 

Downloads without more insight into active usage is an almost meaningless statistic.  

Have you downloaded any of the following apps to help you make payments or keep track of your finances?
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Source: IAB, InMobi (n=1,242 US adults)

Square, which is probably the only other mobile payments brand known by consumers, stands at 8% penetration. This of course is not Square the credit-car-reading smartphone dongle, but the "Pay with Square" app that permits a "contactless" payment where both sides have a Square account. (The "Paid a business for real-world goods/services by mobile" answer probably includes use of the Square dongle.) 

Google Wallet seems completely stalled at 7%. The widespread availability of NFC in Android and Windows Phones is unlikely by itself to jump-start NFC payments in North America. However that could change if the iPhone 5S were to include the capability.

The data above present a picture of increasing, incremental usage of mobile financial services and "payments" by the US smartphone population. That will continue as more services adapt to mobile and consumers become increasingly comfortable with using their mobile phones for a range of transaction types.

However the much-anticipated day when everyone is carrying a digital wallet and using it to buy goods and services in the real-world is still much more hype than reality.