The FinTech Chemist: Adoption Woes for Digital Wallets

Studying the properties and composition that make up the FinTech ecosystem

Welcome to this week’s industry analysis with the FinTech Chemist. While I may not be literally mixing solutions and preparing reagents, I am studying and testing out the latest and greatest in FinTech. One thing science hasn’t been able to crack is why the US is slow to adopt digital wallets.

Sometimes experiments don’t always go as planned. While we may theorize and follow the scientific steps that seem to make logical sense, it can be challenging to get the same result twice. Unlike China, Australia, and even the UK, the US is lagging when it comes to utilizing digital wallets. While digital wallets aren’t necessarily a failed experiment in the US, (it is a billion-dollar industry after all), we still seem to be finding our footing when it comes to using this technology.

Being a chemist, I enjoy actively testing gadgets in the field. I’m an avid Apple user (sorry Samsung, they sucked me in with their colorful Macs, and I was a first-generation iPhone user). So, of course, I’m set up on Apple Pay. I use my Apple Watch or iPhone almost every time I go to the grocery store. It’s must faster than using my credit or debit card, and to quote Apple, Because spending money shouldn’t mean spending more time at the register. Not to mention, I can use Apple Pay at all my favorite retailers. To my bank account’s despair, I’m more inclined to buy an item when I go somewhere online and I happen to be on my iPad or iPhone. I don’t have to hunt down my wallet and go through the manual process of typing out my credit card number. If the technology is so easy, safe, and secure, why aren’t more consumers using it?

Here’s my scientific theory on slow adoption rates:

  1. Paper or plastic? Both are still convenient.

  2. Smartphone vendors are the ones driving the market forward.

  3. Fear of change and lack of education.

Let’s break these theories down. Most consumers still use their credit and debit cards for transactions because there isn’t a clear benefit to change up their habits. The numbers that back up this theory are a bit disheartening. In a recent study by Mintel, three-quarters of consumers don’t see a need to change their payment behaviors, and only one quarter (27%) said they had any interest in using their smartphone as a wallet.

Now, it isn’t necessarily a bad thing that smartphone vendors are the ones controlling the majority of the digital wallet market. However, it does mean they want to keep customers from straying – this limits the options for consumers when they’re used to a particular brand.

According to BlueFin, a payment security company, Unlike Visa or Mastercard, mobile wallets are hardly universal. Apple Pay, Android Pay, and Samsung Pay are restricted to their own devices. Walmart Pay has a higher overall usage rate because anyone with a smartphone can access it. For many consumers, switching between mobile wallets based on where they’re shopping creates unnecessary payment friction.

It all comes down to cost when merchants consider adopting new technology, and vendors often believe it’s expensive to set up. The industry is fragmented, which is why people aren’t keen on changing. Moreover, there’s that dirty four-letter word: FEES. Many vendors believe that they will incur extra fees if they set up their business to accept mobile payments. Let’s dispel that myth right now. The gap between awareness and adoption needs to be closed so users can feel more confident in their overall mobile payment experience.

The future of digital wallets reminds me of my fifth-grade science project: fog in a bottle – all this to say things in this space will continue to be hazy unless consumers begin to experience tangible benefits. Now, onto my next scientific… I mean FinTech hypothesis adventure. Also, as always, remember to take your vitamins!

Read the previous edition of The FinTech Chemist