Expansion in the use of mobile payments over time has corresponded with an increase in smartphone ownership. In 2011, 44% of mobile phones were smartphones. By 2015, the share had increased to 76%.

This chartbook presents findings from a nationally representative telephone survey, undertaken by The Pew Charitable Trusts, that examined consumers’ opinions, experiences, and expectations of mobile payments. The survey followed focus groups that Pew previously convened as a first step in understanding consumers’ views on the potential benefits and risks of mobile payments. Specifically, this chartbook reports statistics on consumers’ awareness and perceptions of mobile payments technology, their usage and motives for use, and any barriers to usage. The key findings are:

• Mobile payments users – consumers who have made an online or POS purchase, paid a bill, or sent or received money using a Web browser, text message, or app on a smartphone – are more likely than nonusers to be millennials or Generation Xers, live in metropolitan areas, and have bank accounts and college or postgraduate degrees. Of these demographic categories, age is the most predictive of mobile payments use, particularly as it relates to smartphone ownership. (See the appendix for the demographics of mobile payments users and nonusers.)
• Making a purchase through a smartphone Web browser or downloaded app is the most common mobile payments activity.
• Consumers see a number of benefits to using mobile payments, particularly receiving alerts, electronic receipts, rewards, discounts, and help with budgeting.
• Consumers often don’t know how mobile payments compare with other payment methods in terms of convenience, cost, privacy, and security.
• Barriers to usage include concerns about the safety of mobile payments technology, which might result in identity theft or the loss of funds, and poor compatibility with cash-based transactions.
• Consumers want the data they generate by use of mobile payments to be secure and protected and access to it to be limited across entities, from phone carriers to app developers and advertisers.

The charts that follow delve into these findings and highlight the advantages that consumers associate with mobile payments usage and the barriers that may prevent people from adopting or safely using this technology.

Many consumers, including a large number who have never made a mobile payment, have heard of different mobile payment activities, such as using a smartphone to make online or point-of-sale purchases or pay bills.

Mobile payments users are consumers who have made an online or point-of-sale purchase, paid a bill, or sent or received money using a Web browser, text message, or app on a smartphone. Users are more likely than nonusers to be millennials or Generation Xers, live in metropolitan areas, and have bank accounts and college or postgraduate degrees. Of these demographic categories, age is the most predictive of mobile payments use, particularly as it relates to smartphone ownership.

Getting a smartphone is the most common catalyst cited for adoption of mobile payments technology, and millennials and Gen Xers are far more likely than those from older generations to own smartphones. The majority of basic phone owners (77%) say they are unlikely to buy a smartphone in the next year, meaning the age gap in smartphone ownership will probably persist. Smartphone ownership also varies dramatically by annual household income. Only 53% of consumers earning less than $25,000 annually own a smartphone compared with 81% of those earning $50,000 or more annually.

Mobile payments use varies by type of activity and with age, with more millennials having used their smartphones to make a purchase through a smartphone Web browser or downloaded app than to send or receive funds. Overall, few consumers make payments or donations by sending text messages. PayPal’s smartphone app is the most commonly used, ahead of Google Wallet, Apple Pay, and the Starbucks and Dunkin’ Donuts apps, and millennial and Gen X smartphone owners are more likely than those from the baby-boom or silent generations to have used these apps, except for Dunkin’ Donuts.

Millennials and Gen Xers in particular are motivated to use mobile payments in part because they like receiving rewards, discounts, alerts, and electronic receipts. Consumers are also interested in avoiding fees, such as overdraft or check cashing fees, and using their smartphones to help them budget. In fact, research shows that consumers are using smartphones to help with budgeting more than in previous years.

Consumers cite a variety of barriers to mobile payments use; the most common is concern about safety, specifically the risk of identity theft or loss of funds. Some obstacles vary by generation, with older consumers being less informed about the benefits of mobile payments and millennials being especially concerned about running out of data on their phone plans. The use of cash to make payments is cited across generations as a barrier, because cash cannot be easily loaded onto a smartphone. Cash is still a very common payment method, and consumers average about 8.5 retail cash purchases a month.

Nearly half of respondents say they don’t know whether mobile payments are faster, easier, or more private than other transaction types, and even more do not know if mobile payments are more common, cheaper, or safer. Reducing this uncertainty, especially about the safety of the technology, could increase use.

Mobile payments use is related to more favourable perceptions of the technology in terms of convenience, cost, privacy, and security. Users agree more often than nonusers that mobile payments are faster, easier, more common, cheaper, more private, and safer than other payment methods.

Consumers often assume that financial institutions, retailers, and others are collecting information about them, including tracking their locations when they execute financial transactions. In the focus groups, a number of consumers expressed moderate discomfort with the sharing of their personal information. About 8 in 10 survey respondents, with general consistency across political parties, say that steps should be taken to regulate how data are collected, stored, and used.

In focus groups, participants were generally unaware of which personal data are collected when they conduct mobile transactions or how those data are used. They also did not know whether or to what extent their privacy is compromised. When asked specifically who they think should have access to these data, only about half of respondents say that the payment sender should have access, and far fewer (5%) agree that advertisers should have access.

Conclusion

Age explains some but not all attitudes about mobile payments. About 90% of millennials and 83% of Gen Xers own smartphones, and individuals in these generations constitute the majority (72%) of mobile payments users. They are especially compelled by the option to receive rewards, discounts, alerts, electronic receipts, and help with budgeting and to avoid fees and are the most likely age groups to say mobile payments are faster and easier than other payment methods.

Across generations, concern about the safety of mobile payments technology is the biggest obstacle to use. Specifically, consumers are concerned about the potential for identity theft or loss of funds. Consumers of all ages cite the use of cash as a payment method as a barrier, because cash cannot be easily loaded onto a smartphone. And customers often don’t know how mobile payments compare with other payment methods in terms of convenience, cost, privacy, and security.

The growing mobile payments market has the potential to provide a convenient, affordable way for Americans to transact and manage their money. Yet concerns and uncertainty about the safety of mobile transactions and the lack of systems for depositing cash directly onto mobile websites and smartphone apps may be holding back this technology. Addressing these deficiencies could increase adoption, allowing consumers to take full advantage of the potential of mobile financial products to deliver safe and secure transactions.

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Asian payment methods driving global mobile adoption

The increase is driven particularly by major Asian-based payment methods including JCB, UnionPay, and

Mobile Payments Index: a third of global online transactions now mobile

Alipay. JCB recorded the highest share of mobile payments across all the payment methods analyzed, with 54% of payments made on a mobile device, up from 47% last quarter. Alipay increased to 44% (up from 35%), and UnionPay to 31% (from 23%).

In Europe, iDEAL (Netherlands) was steady at 49% of online payments on mobile, Open Invoice (Scandinavia and Germany) reached 47%, Bancontact/Mr Cash (Belgium) was at 39%, and SEPA Direct Debit (Europe-wide) at 22%.

Smartphones now more popular than tablets for online retail purchases…

Shoppers have generally preferred making retail purchases on tablets rather than smartphones. However, the Index shows that for the first time, smartphones have overtaken tablets as the preferred device for making online retail purchases, at 17.5% on smartphone against 16% on tablet, compared to 14% and 17% respectively last quarter. This compares to 29% of digital goods payments on mobile against 7% on tablet, figures that are consistent with last quarter.

..and lead tablets in mobile payment share across the world

Smartphones continue to grow their share of mobile payment volume, increasing 2% from last quarter to 68% on smartphone versus 32% on tablet. This trend of smartphone increasing its share has now been continuing for 10 straight quarters.

On a regional basis, smartphone use far outweighed tablet in Asia, with 29.5% of online payments on a smartphone compared to 4.5% on a tablet. Europe and the US displayed a similar but less pronounced trend, with 23% of online payments on a smartphone and 11% on tablet in Europe, and 23% on a smartphone and 8% on a tablet in the US.

iPad has highest average transaction value

But despite the overwhelming popularity of smartphones over tablets in terms of making a purchase across both regions and verticals, one bright spot for tablets is that in terms of average transaction value (ATV) for device types, for the first time, the iPad led the way, at $107, edging out not just smartphones, but also desktop/laptop, the traditional leader, at $106. This was followed by the Android tablets at $86, iPhone at $83, and Android smartphones at $73.

The UK nudges 50% mobile transactions online

Among individual markets, the UK continues to lead the way in mobile payment adoption, with 49% of online transactions on mobile device (and just over 34% of these on a smartphone). Among other high adoption markets, the Netherlands reached 35% (23% on smartphone), and Sweden 32% (25% on smartphone).

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A survey of 2,900 people on behalf of the Fed shows that mobile phones have become ubiquitous; 87% of respondents have handsets, and 71% of these are smartphones, up from 61% a year earlier.

Mobile phones have increasingly become tools that consumers use for banking, payments, budgeting, and shopping. Given the rapid pace of developments in the area of mobile finance, the Federal Reserve Board began conducting annual surveys of consumers’ use of mobile financial services in 2011.

The survey examines trends in the adoption and use of mobile banking, payments, and shopping behaviour and how the emergence of mobile financial services affects consumers’ interaction with financial institutions.

This report presents findings from the 2014 survey, fielded in December, which focused on consumers’ use of mobile technology to access financial services and make financial decisions. Where applicable, the findings from the current survey are also compared with the findings from the 2011, 2012, and 2013 surveys.

Topics include consumer access to bank services using mobile phones (“mobile banking”), consumer payment for goods and services using mobile phones (“mobile payments”), and consumer shopping decisions facilitated by use of mobile phones. Details about the survey, its methodology, and limitations can be found in the body of the report and in a methodological appendix.

Key findings of the 2014 survey include:

Mobile phones are in widespread use

• 87 percent of the US adult population has a mobile phone, consistent with 2013.
• 71 percent of mobile phones are smartphones (Internet-enabled), up from 61 percent a year earlier.

The ubiquity of mobile phones is changing the way consumers access financial services.

• 39 percent of all mobile phone owners with a bank account have used mobile banking in the 12 months prior to the survey, up from 33 percent in 2013 and 29 percent in 2012.
• 52 percent of smartphone owners with a bank account have used mobile banking in the 12 months prior to the survey, up from 51 percent a year earlier.
• Among those mobile phone users with bank accounts who do not currently use mobile banking, 11 percent think that they will probably or definitely use it within the next 12 months, down from 12 percent a year earlier.
• The most common use of mobile banking is to check account balances or recent transactions (94 percent of mobile banking users).
• Among mobile banking users, transferring money between an individual’s own accounts (61 percent) and receiving an alert (e.g., a text message, push notification, or e-mail) from their bank (57 percent) are the second- and third-most common uses of mobile banking.
• 51 percent of mobile banking users have deposited a check using their mobile phone in the 12 months prior to the survey, up from 38 percent in 2013.
• Among mobile banking users, the frequency of use has increased slightly, from a median of four times per month in 2013 to five times per month in 2014. This frequency was five times per month in 2012.
• Residents of more rural areas have a lower incidence of mobile banking use than residents of more urban areas.

Usage of mobile banking and mobile payments by mobile phone type, 2011–14

Mobile phones are also changing the way consumers make payments.

• 22 percent of all mobile phone owners reported having made a mobile payment in the 12 months prior to the survey, up from 17 percent in 2013 and 15 percent in 2012.
• The share of smartphone users who reported having made a mobile payment in the 12 months prior to the survey has increased to 28 percent, up from 24 percent in both 2013 and 2012.
• Among mobile payment users with smartphones, the most common type of mobile payment was bill payment through an online system or mobile app (68 percent, up from 66 percent in 2013).
• 39 percent of all mobile payment users with smartphones have made a point-of-sale payment using their mobile phone in the 12 months prior to the survey, in line with the 39 percent reporting such payments in 2013.
• Of mobile payment users with smartphones who made point-of-sale mobile payments, 31 percent did so by scanning a barcode or QR code displayed on their phone’s screen at check out (down from 39 percent in 2013), while 22 percent used an app that did not require tapping their mobile phone or scanning a barcode (up from 17 percent in 2013).
• Residents of more rural areas have a lower incidence of mobile payments use than residents of more urban areas.

Measuring the Use of Mobile Payments and Mobile Banking

A preference for other methods of banking and making payments, as well as concerns about security, continue to be the main impediments to the adoption of mobile financial services cited by some consumers.

• Of those not using mobile banking, the primary reason respondents cited was a belief that their banking needs were being met without the use of mobile banking (86 percent).
• The primary reason non-mobile payment users gave for not using mobile payments was that they believe it is easier to pay with cash or credit/debit cards (75 percent).
• Concern about the security of the technology was a common reason given for not using mobile banking or mobile payments (62 percent and 59 percent, respectively, of non-users).

Smartphones are changing the way people shop and make financial decisions.

• 47 percent of smartphone users have comparison shopped with their phone while at a retail store, and 33 percent have used their phone to scan a product’s barcode to find the best price for the item.
• Of those consumers who used their phones to comparison shop in a retail store, 69 percent have changed where they purchased a product as a result of the information they found.
• 42 percent of smartphone users have used their phone to browse product reviews or get product information while shopping at a retail store, and 79 percent of them changed the item they purchased based on this information.
• 63 percent of mobile banking users have checked their account balance on their phone before making a large purchase in the previous 12 months leading up to the survey, and over half (53 percent) of them decided not to purchase an item as a result of their account balance or credit limit.
• 29 percent of all mobile phone users and 38 percent of smartphone users have used their phone to track purchases and expenses.

Mobile phones are prevalent among unbanked and underbanked consumers.

• The share of consumers who are unbanked is 13 percent, and the share who are underbanked is 14 percent.
• 67 percent of the unbanked have access to a mobile phone, 65 percent of which are smartphones.
• 90 percent of the underbanked have access to a mobile phone, 73 percent of which are smartphones.

48 percent of underbanked consumers had used mobile banking in the 12 months prior to the survey.

 Download the report here

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The PSR’s aim is to make payment systems work well for the people and organisations

that use them, and deliver greater choice, innovation and competition – according to Leaprate.com.

Payment systems let people pay a deposit on a house, withdraw money from a cash machine, transfer money via smartphone, receive salaries into bank accounts, and much more. They are vital to the UK’s financial system and process in the region of 21 billion transactions worth around £75 trillion a year.

“Today marks a new start for payment systems. Our approach will bring change to the industry, injecting competition and innovation where it is needed most, and will put the interests of the people and businesses that use payment systems front and centre,” comments Hannah Nixon, managing director of the Payment Systems Regulator.

“True, long lasting change will be difficult, but we have the powers and the people to make it happen. Our challenge now – the challenge we share with industry – is to work together to deliver it.”

Today’s publication confirms the three ‘pillars’ of the new PSR’s work:

•  A new and inclusive strategy setting process that really involves users of these systems for the first time. This will be done by setting up a Payments Strategy Forum to develop a long term vision for how payment systems should develop and identify priority areas for the industry to work together where appropriate to deliver this vision;
•  Increasing transparency around how decisions are made, and who is making them. We will shine a light on the control and governance of payment systems, challenge payment system operators to explain how they have listened to people and organisations that use payment systems, and check that operators are really taking payment systems in a direction that meets people’s needs; and
• Improving the way people and businesses gain access to a payment system – whether directly or indirectly – to be clearer and fairer and in a way that fosters innovative and competitive solutions for customers using payment systems.

As well as confirming its final policy, the PSR has published draft terms of reference for two market reviews and announced a card payment systems programme of work. The two market reviews will look at ownership and competitiveness of infrastructure provision; and the supply of indirect access to payment systems. This work will help the PSR gather important evidence to help it make robust decisions that make a real difference to those who use payment systems.

The PSR’s agenda complements work by the Financial Conduct Authority and the Competition and Markets Authority to deliver a more competitive banking industry in the best interests of consumers and the economy.

The new watchdog, whose upcoming launch was first announced in the spring of 2014, has been putting the final touches to its organization before the official start of operations. In January 2015, the regulator added three senior executives – Carole Begent, Mark Falcon and Louise Buckley to its ranks.

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