Security or unfamiliarity: What's stopping mobile-payments adoption?
From left to right, T.J. Horn of FICO, Julie Conroy of Aite and Charles Yanak from Fujitsu, participate in a panel at the recent BCX Summit in Chicago.
Consumers over the years have shown they enjoy the convenience of digital banking and mobile payments. But, market surveys find time and time again that consumers remain uneasy about the security of their electronic transactions.
That, in turn, has put financial institutions and fintech companies in a quandary: How do they provide products with top-notch security while making it easy for consumers to use things such as mobile wallets and in-app payments?
That was one of many questions one panel at the recent Bank Customer Experience attempted to answer during a discussion about security and simplicity in electronic transactions.
For the panelists who participated in this discussion, they agreed consumers' security concerns might be more about unfamiliarity with certain products more than anything else.
"It's a fear of the unknown," said Charles Yanak, the director of product management and partner development at Fujitsu. "[Paying with a smartphone] is not something we're used to doing. Because it's new, consumers are initially standoffish about it."
Recent consumer surveys back Yanak's assumption.
Some 65 percent of consumers do not see any benefit to paying with a mobile wallet, according to the Fed's most recent consumer survey. Eighty percent of some 1,200 respondents believe paying with a plastic card or cash is easier.
And of course, consumers have security and trust issues when it comes to mobile payments.
Some 67 percent of respondents don't true the security of mobile payments while 47 percent believe the technology is unsafe.
"You need to train consumers about why it's [safe]," said Julie Conroy, research director at Aite Group. "We're creatures of habit. With online shopping, we’re used to putting in passwords [as a security precaution]. There's a lot of habituation with that and [the industry] is not doing very well changing that."
Conroy went on to say she believes consumers' aversion to mobile payments is more about ingrain habits. She believes that could change as proximity mobile payments acceptance becomes more widespread and wallet providers add features such as rewards.
T.J. Horan, vice president of product management at FICO, believes proximity mobile payments can become more of a thing if consumers about confident about it.
"When you don't have any self-doubt, you will start to see adoption," he said. "No one likes to get to the counter and it not work. I think the convenience of making that payment without any doubt will be a main driver."
As far as consumers' actual security concerns, biometrics could help lessen fears.
A recent Visa study of more than 14,000 consumers in several European countries found some 68 percent of respondents are interested in using biometrics to make a payment.
That bodes well for financial institutions and fintech companies because consumers don't have to do much on their end to use biometric technology. From fingerprint authentication to selfies, those security forms are easy to use for consumers.
"Consumers like biometrics for that reason because it's active and it's a proactive attempt to be identified," Yanak said. "Consumers are a little wary of behavioral biometrics. They want to be involved, but they don’t want it to be difficult."
Here are a couple of other notable quotes from this session:
Horan on security loopholes: "There was so much demand to link with Apple Pay that some of the initial security efforts were left secondary. I guarantee you the fraudsters will figure out the weak link before the consumers. There has to be caution that we don't expose ourselves to the fraudsters."
Yanak on banks' credibility regarding security: "Banks are worried about credibility. Every FI knows that. In North America, we have a lot of fast followers. The last thing you want to do is have a credibility issue. Do you want to take that risk [with new technology]? There's a balance. There's aversion to the implantation of tech because in the back of their mind, every single one of them is worried if it [doesn't] work."
Will Hernandez / Will Hernandez has 14 years of experience ranging from newspapers to wire services and trade publications. Before becoming Editor of MobilePaymentsToday.com, he spent two years as the content manager for PaymentsJournal.com, a leading payments industry news aggregator and information hub published by Mercator Advisory Group. Will spent four years covering the payments industry as an associate editor for multiple publications in SourceMedia's Payments Group based in Chicago.