Americans often consider themselves trendsetters, but it doesn’t quite ring true when it comes to mobile wallet payments. In fact, China takes the top spot, with roughly 40 percent of its population of 1.4-billion using mobile wallets as a way of paying, compared to about 26 percent in the U.S, which also trails Vietnam, South Korea, the U.K. and India.
However, more U.S. consumers discovered the convenience of contactless mobile payments during the pandemic, accelerating the adoption of a technology that for years failed to really flourish. And data suggests that people are making NFC-based checkouts part of their regular routines, as half the nation’s smartphone-owning population is projected to use mobile payments by 2025.
What’s Driving Contactless Payments?
During the earliest months of COVID-19, people were figuring out how to live with uncertainty, and adapting how they paid for goods and services was no exception. More than two-fifths of consumers in May 2020 viewed contactless cards as a safeguard against transmitting the virus. While the pandemic converted people into contactless payment adopters, it’s the convenience factor that’s winning them over for the long haul. The 29 percent uptick in people choosing mobile wallet payments for in-store payments during 2020 was far from a fad.
Consumers, especially millennials and Gen Z, like many benefits of digitizing their wallets. For example, there’s the advantage of leaving the physical wallet at home. Mobile wallets can store loyalty cards in addition to payment details. That means tap-and-go payments allow consumers to collect rewards at checkout without fumbling through a stack of plastic cards.
Mobile wallets also enhance security. Users unlock their phones with a passcode or use their biometric profile (usually their face or fingerprint) to make a payment via near-field communication (NFC). Payment data isn’t on display as it is with a plastic card. Additionally, the transaction uses the same payments infrastructure as EMV payments, which authenticates payments with unique transaction codes.
Furthermore, nothing changes with loyalty rewards that convince many people to sign up for a particular credit card. Consumers still accumulate airline miles, cashback and other perks when using a card stored in their mobile wallet.
Will Mobile Wallets or Contactless Cards Prevail?
Despite the significant progress mobile wallets have made in the past few years, the use of contactless cards still overshadows them. According to a Q2 2022 PYMNTS survey, 14 percent of people used contactless plastic in stores versus the 5.8 percent opting for mobile wallets. What’s interesting when you unpack the data is that 5.8 percent is actually less than the adoption rate researchers found back in 2019, while the 14 percent using contactless cards represents a near doubling of 2021’s pace. For now, it appears consumers prefer contactless cards even if mobile wallets remain a force to watch.
The Bottom Line for Merchants
When it comes to contactless payment cards and mobile wallets, merchants aren’t facing an either-or scenario. Business owners who are serious about creating competitive, customer-pleasing payment experiences need to accept both forms of contactless payments as well as any other types of payments their customers prefer.
The early 2020s saw rapid change in consumer behaviors, including more consumers trying mobile wallet payments and building them into their routines. Furthermore, now that more consumers are accustomed to a tap-and-go payment experience, they’ll likely gravitate toward stores, restaurants, and other merchants that have the capability to accept them. They’re aware and ready to use a secure, convenient way to pay in their smartphones. Make sure they can.
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