What's holding back mobile payments

By Michael Lloyd

Apple Pay, Android Pay and other mobile payment platforms have been in the UK for more than a year, but they have yet to really take off here.

All the hype, in other words, doesn't appear to be living up to the reality.

Apple claimed in April 2016 that Apple Pay was showing promising signs of growth. However, data from research firm Timetric revealed the service only processed $10.9 billion globally in 2015, with the majority of that coming from the US.

Here are four roadblocks keeping UK consumers from ditching their debit and credit cards in favour of paying with their smartphones.mobile-payments-not-taking-off

1. Security concerns.
As with many new payment technologies, security concerns appear to be a major barrier to widespread adoption of mobile payments.

In June 2016, a Marketing Sciences Brand Trust survey found that 20% of consumers would not trust a mobile wallet from the largest brands, including PayPal, Apple and Samsung, or any of the biggest British banks.

Additionally, an August 2016 survey from anti-virus firm Kaspersky Lab found that 74% of Britons and Americans are steering clear of mobile payment platforms because of potential security weaknesses. The majority of respondents said they would be more likely to start using mobile payment services if they felt they were more secure.

However, the security fears, like the hype over mobile payments, appear to be overblown.

Mobile payment providers such as Apple, Android and Samsung do not share your credit card details with vendors, and they use tokenisation, which replaces sensitive data with unique identification symbols that retain all the essential information without compromising its security.

Additionally, smartphones are password- or thumbprint-protected, and most can be wiped remotely in the event of loss or theft.

Of course, that's not to say that a thief or hacker could not compromise a mobile payment. Mobile payments, as with anything involving access to money, will tempt fraudsters.

2. Contactless cards are already convenient.
The popularity of contactless cards in the UK may make mobile payments seem almost superfluous.  

Windsor Holden, a Juniper Research analyst, told PYMNTS.com that mobile payments might seem like a waste of time to UK consumers using contactless cards, which are typically accepted in more places.

UK consumers were initially sceptical of contactless payments, too, though. If the same pattern holds true, today's scepticism toward mobile payments may soon give way to widespread adoption, Mike Cowen, head of digital payment products at MasterCard UK & Ireland, said in an emailed response to questions.

"While it may sometimes feel like we Brits are a bit slow to embrace new payments technologies, it's worth noting that we were one of the first countries in the world to launch contactless payments," Cowen said. "It took a while to really get going, but we have now really taken it to heart with over 1.1 billion contactless transactions in the first half of 2016, compared to 1.05 billion for the whole of 2015."

3. Mobile payments don't offer anything new. 
Experts say mobile payment platforms won't really take off until they offer something over and above what consumers get from contactless cards and other services.

What might that be? Google executive Jack Connors said at the annual Mobile Payments Conference that mass adoption won't happen until mobile payment platforms entice users with special offers, loyalty rewards and overall increased engagement.

Mobeewave co-founder Maxime de Nanclas argued in a September 2016 opinion piece for Mobile Payments Today that Apple Pay and others might catch on faster if they add P2P services that let users send money to each other.

It should be noted that Samsung Pay offers some of these "extras", such as the ability to store loyalty cards and membership cards alongside payment cards, but the payment platform is not available in the UK (as of September 2016).

4. A fragmented market place
The emerging mobile payments industry in the UK is still very much a horse race.

The Marketing Sciences Brand Trust survey suggested that while confidence in a range of mobile wallet providers is rising, no clear market leader is emerging. That makes it difficult for one or two providers to break through and achieve mass adoption.

The fact that different mobile wallets are accepted at different retailers and businesses is also a major problem. As such, mobile payment platforms cannot hope to replace debit and credit cards, which are accepted almost universally.

See related: Calling all payment tech junkies: Emerging innovations gather steam, Pay friends via mobile with P2P payments, Alternatives to Apple Pay on the horizon

Published: 20 September 2016