Why Europe Is More Cautious About Mobile Payments
As Apple Pay points a new spotlight at mobile payment systems — and the degree to which they have or haven’t gained traction with consumers around the world — several surveys have revealed interesting insight into how consumers’ willingness to pay with their smartphone or a smartwatch differs in North America versus other markets like Europe and Asia.
As Apple Insider reported recently, a survey conducted by German market research firm GfK found that European consumers are wary of smartwatch-based digital wallets, while American and Chinese consumers looked at products like Apple Pay with more interest. Just 20% of German consumers and 27% of those in the U.K. reported interest in using a contactless payment system built into a smartwatch, compared to 54% in China and 40% in the U.S.
The numbers are drawn from a relatively small sample — GfK conducted interviews with 1,000 smartphone owners in each of five countries: China, Germany, South Korea, the U.K. and the U.S. Surprisingly, only 27% of South Korean consumers reported interest in a smartwatch-based mobile payment system.
A possible reason for the disparity in consumers’ interest in systems like Apple Pay is the existence of established contactless payment systems, as Apple Insider points out. Credit card based contactless payment systems have long been in use in Europe, and in South Korea, consumers use similar systems built into mobile phones and SIM cards. However, China and the U.S. have not seen large-scale implementations of contactless payments yet. While Hong Kong has used the Octopus NFC-based system since the 1990s, similar systems have not gained traction in mainland China.
GfK observed similar disparities when it inquired about consumers’ interest in smartwatch-based digital wallets intended for other purposes, such as storing health or identification data. 70% of Chinese consumers, 50% of American consumers, and 43% of South Korean consumers expressed interest in storing health data in such a service, while just 33% of U.K. consumers and 25% of German consumers were interested. Similarly, 57% of Chinese consumers were interested in storing identification data on a smartwatch, while 41% of Americans expressed interest. South Korea, the U.K., and Germany followed at 33%, 28%, and 20%.
The survey preceded the launch of Apple Pay, and the high level of interest on the part of American consumers likely speaks to the convenience that Americans perceive as one of the advantages of smartwatches. Apple Insider notes that while China, South Korea, Germany, and the U.K. already issue “smart” identification cards, American citizens have fought efforts to do so in the U.S., even for state-issued driver’s licenses.
Just after Apple Pay launched, VentureBeat reported on a survey by Adyen, an Amsterdam-based payment technology firm, that revealed how Europe is the leading region for mobile payments. The survey covered the period of July through September, and found that mobile devices accounted for 23.3% of all online payments during those three months, up from 21.5% in the previous quarter.
Europe was the leader among global regions, with mobile payments averaging at 24% for the quarter. Europe also saw 34% growth between August 2013 and August 2014.
The U.K. lead among European countries, with mobile payments averaging 41% during the quarter, followed by the Netherlands and Spain, both at 26%, France at 18%, and Germany at 16%. North America stayed steady at 16.7%, and Latin America remained below other regions, at 6% for the quarter. Additionally, Asia accounted for the second-highest proportion of mobile transactions among global regions, at 17% of total online payments. Between August 2013 and August 2014, Asia also showed the strongest mobile payments growth, and increased by 58%.
Re/Code reported just after Apple Pay’s launch that users activated more than a million credit cards during the first 72 hours after the service was available. And the New York Times recently reported that in the first three weeks since the system was released, Whole Foods processed more than 150,000 Apple Pay transactions, McDonald’s said that Apple Pay accounted for 50% of its tap-to-pay transactions, and Walgreens said that its mobile wallet payments had doubled since Apple Pay came out.
While Apple Pay is far from a dominant system, retailers’ numbers hint at what may become a mainstream willingness to stray from cash and the traditional uses of credit and debit cards. Denée Carrington of Forrester Research told the New York Times that “a lot of it has to do with the strength of the Apple brand and how much merchants and customers love how easy the experience is. I’m not saying it’s changing the landscape overnight. But this has never happened with other mobile wallets.”
Other mobile wallets like Google Wallet and Softcard saw an uptick in interest and use thanks to the introduction of Apple Pay, and also because of Apple, more retailers are becoming interested in supporting the technology for NFC payments.
Though mobile payments are growing more popular, their use in North America still remains low. Gartner estimated that worldwide, people spent $235.4 billion through mobile payments in 2013, up from $163.1 billion in 2012. But the figure is much smaller in North America, where consumers spent $37 billion through mobile transactions in 2013, up from $24 billion in 2012.
A survey conducted by Bizrate insights between October 23 and October 28 found that whether or not they owned an iPhone 6 or iPhone 6 Plus, 40% of U.S. online shoppers like the idea of using a smartphone to pay for purchases instead of carrying a wallet — a number significantly larger than the group of respondents who own or plan to own one of Apple’s new iPhones (27.5%) or the group of those who indicated interest in using Apple Pay in general (19%). As PYMNTS reports, Bizrate found that convenience is both a strong force with consumers and a major unmet need — but only 32% of consumers perceived Apple Pay as more secure than swiping their credit card at a store.
As mobile payments gain traction both in North America, Europe, and China, it will be interesting to see how adoption and consumer attitudes evolve, and which of a growing number of mobile payment systems appeal to customers for their security and convenience.