A CreditCards.com poll shows consumers are wary of using their cellphone to make payments. But some experts say it’s only a matter of time before most do
As Apple unveiled a new service called Apple Pay that allows consumers to pay at registers using smartphones, nearly two-thirds of Americans say that way of paying does not appeal to them, according to a new survey by CreditCards.com.
Asked if they would use their phones to pay for items if they could, 44 percent of respondents said they never would, while 18 percent said “hardly ever.” Just 4 percent said they would always use phones as a method of payment, with 9 percent saying they would most of the time. The survey of 1,003 people, conducted Sept. 4-7 for CreditCards.com by Princeton Survey Research Associates International, has a margin of error of 3.6 percentage points.
Although widespread skepticism about paying by mobile phone might seem like a major obstacle, analysts say it’s not unusual for consumers to take time to warm to new technologies. For instance, withdrawing cash from ATMs and paying bills online took awhile to catch on as the public became persuaded that the benefits outweighed the risks, says Tim Bajarin, president of Creative Strategies, a high-tech research consulting firm based in Silicon Valley.
“If Apple creates a level of trust and privacy and makes the experience super-convenient, consumers will follow,” he says.
The CreditCards.com survey results echo previous research that shows the public wary of mobile payments. In a 2013 survey by TSYS, an international payments company, 33 percent said they were not interested in making small purchasing using a bar code on their phones, compared with 27 percent who were interested. A similar margin rejected the idea of paying for purchases with a credit or debit account linked to a mobile phone “wallet.”
Apple Pay allows users to enter credit or debit card information into the new phones, which are secured with fingerprint recognition and encrypted storage. At retailers with the right technology, iPhone users can just wave or tap their phones and complete the transaction instantly. The transactions can also be completed using the new Apple Watch that the company showcased on Tuesday.
Apple says credit card numbers will not be transmitted to the merchant by Apple Pay. Instead, the service uses a technology called tokenization, which sends a one-time payment number and security code. If the phone is lost or stolen, Apple Pay can be blocked remotely. Apple says it will not receive information about what purchases are made using Apple Pay.
“It’s going to change the way you pay for things forever,” Cook said. Apple Pay is expected to be available in the U.S. in October.
To make the system work, Apple said it has forged partnerships with the six biggest credit card issuers and others totaling 83 percent of the U.S. card market. The service will work at retailers whose payment systems have Near Field Communication (NFC) technology, which will include partners such as Macy’s, Bloomingdale’s, Walgreens, Staples, Subway, McDonald’s, Whole Foods, Disney and Apple retail stores, Apple said. For online payments, Apple Pay will work with apps from companies such as Target, Groupon, Uber and Panera Bread to enable one-touch payments. A partnership with OpenTable will allow customers to pay checks at participating restaurants on their phones.
By announcing those partnerships with major retailers and banks, Apple helped address concerns that mobile payment systems are too fractured to become widely used by consumers.
Apple will not be the first company to make NFC-enabled phones — a host of smartphones running the Android and Windows Phone operating systems already contain NFC technology. And there are already plenty of companies in the growing field of online payments. But because Apple is a large company that has helped change consumer habits in areas such as tablets and music, analysts have said that its entry into mobile payments could be a watershed moment. The company’s iTunes music service has more than 800 million accounts, most of them linked to users’ credit cards.
In addition to overcoming doubts from a public accustomed to swiping cards instead of waving or tapping them, mobile payments face a more immediate challenge: convincing more retailers to buy equipment compatible with NFC-enabled phones.
“If Apple does it in a secure way, their customers are going to want it and use it,” Bajarin says. “Because they sell so many phones, it will absolutely drive the change in terminals that will be used in stores going forward.”
Apple’s announcement comes as the company is facing questions about its ability to keep user data secure, after hackers in August accessed online photo backups on iCloud and distributed naked pictures of celebrities including actress Jennifer Lawrence and model Kate Upton.
A 2012 poll of Internet experts by the Pew Research Internet Project found that the majority believed that most consumers will have embraced and adopted smart-device swiping for purchases by 2020 — nearly eliminating the need for cash or credit cards.
Mary Monahan, research director of mobile for Javelin Strategy & Research, says it is only a matter of time before the confusion of different payment platforms goes away and consumers and merchants become accustomed to mobile payments.
“Mobile payments are growing relatively quickly. Consumers are ready for it,” she says. “But it has got to be an offering that they like, and it has to work well.”
The CreditCards.com poll also found:
- Older people tended to be more reluctant to embrace the idea of paying by smartphone. Just 30 percent of respondents aged 18 to 29 said they would never pay by that method, compared with 64 percent of those aged 65 and up.
- Men are slightly more open to mobile payments than women. Some 41 percent of men said they would never use mobile payments, versus 46 percent of women.
- People with higher levels of education are less resistant to paying by phone. Some 51 percent of those with a high school education or less say they would never make a purchase with their phone, compared with 36 percent of college graduates.
- Parents are more likely to embrace mobile payments than non-parents. Some 47 percent of non-parents say they would never use their cellphone to make a purchase, compared with 37 percent of parents.
See related: CFPB seeks lower-cost ways to serve up mobile banking, Move over cash: Mobile payments go small