Are The Mobile Pays–Apple, Android, and Samsung–In Trouble?

As reported in Mobile Payments Today, a study from Auriemma Consulting Group found that user adoption of the "Pays"--Apple Pay, Google Pay, and Samsung Pay--increased to 34% of smartphone users in Q1 2018, a five percentage point increase year-over-year.

Despite the increase, fewer users said they would recommend the services in 2018 than did in 2017. In 2017, 31% said they wouldn't recommend the service they used. In this year's survey, that percentage rose to 42%. Inactive users were far more negative to the service (87% wouldn't recommend) than active users (6% wouldn't recommend). Auriemma suggested that "developing the habit" is critical to mobile payment success but that merchant-branded mobile payments are better positioned than the Pays to drive more frequent use of mobile payments.

According to Jaclyn Holmes, Auriemma's Director of Payment Insights:

"The influx of new players makes the future of the Big Three uncertain. Being first to market hasn't given Apple, Google, or Samsung a leg up on mobile payment newcomers. Providers who are able to deliver a more positive, reliable pay experience are most likely to encourage continued pay usage, while others may struggle in the years ahead."

Cornerstone isn't ready to call for the death (or even uncertain future) of the Big Three, but what's going on here doesn't bode well for the Pays. The Big Three's problem isn't that they don't have a "positive, reliable pay experience"--it's their inferior value proposition.

For consumers who regularly frequent or shop at Starbucks or Walmart, using those merchants' mobile apps to pay, manage loyalty points, and store funds for future payments makes more sense than using the Pays which don't provide any of those benefits.

In fact, roughly half of Walmart Pay users rate the tool as "much better" than swiping a card when it comes to ease of use, speed, security, and convenience (we wish InfoScout had asked how users rated Walmart Pay versus the other Pays).

Not only are the merchants' apps a threat to the Pays, so are the major P2P providers. In a consumer survey Cornerstone fielded in Q3 2017, we asked consumers, "How likely would you be to use a general use debit card from the major P2P providers?" Nearly half of Millennials said that not only would they be "very likely" to use PayPal, they might even make it their primary payment card. Or payment app.

The Pays--Samsung, in particular--have some catching up to do.  A study from Kount, the Fraud Practice, CNP and PayPal found that nearly six in 10 merchants already accept PayPal--20 percentage points more than accept Android Pay, and 43 percentage points than take Samsung Pay.

Bottom line: It wasn't too long ago that financial institutions (credit unions in particular) were scrambling to accept Apple Pay, anticipating big increases in payment volumes and (perhaps just as importantly to a lot of them) hoping to jump on the cool kids' bandwagon. It hasn't paid off--and while it still might, realizing those benefits will require fighting off new threats to the FIs' payments business.

Ron Shevlin
Director of Research
Cornerstone Advisors