The Mobile Moment: Barriers and Opportunities for Mobile Wallet. Spring 2013

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1 The Mobile Moment: Barriers and Opportunities for Mobile Wallet Spring 2013

2 Barriers Smartphone ownership and online shopping are nearly ubiquitous, but the battle for mobile wallet market share has just begun. What do consumers really know about the advantages of mobile wallets, and what can you do to increase adoption?

3 Mobile wallet is a new concept, just half are familiar with the technology, but of those who are familiar, nearly one-quarter are looking forward to adopting Familiarity with Mobile Wallet Use of Mobile Wallet 8% 22% 50% 42% 16% 62% Very familiar Somewhat familiar Unfamiliar Used in past 6 months Not used, but plan to Not used, and do not plan to 3 Base: All Respondents Q11: Companies offer the ability to pay by swiping or tapping your smartphone at the cash register, instead of using cash or credit cards. How familiar are you with this technology? Base: Those who have knowledge of mobile wallet Q12: Which of the following actions have you taken in the past 6 months or plan on taking in the next 6 months?

4 For the 62% who don t currently plan to adopt a mobile wallet, predictably, security tops the list of concerns Notably, the benefits to adopting mobile wallet, over traditional payment methods, aren t obvious to most consumers Barriers to Using Mobile Wallet I am worried about security I don't want to pay any fees associated with using a mobile wallet I don't want the store to have my mobile wallet information Credit cards offer me better rewards than mobile wallets It's not as convenient as using cash or credit card No single payment system across the different merchants It's not available at stores where I would want to use it I don't know which app is best The technology doesn't always work properly It's too difficult on a small screen 21% 19% 19% 19% 17% 16% 11% 34% 54% 73% 4 Base: Those who have not waved or tapped mobile phone at cash register to pay for a purchase in past 6 months, do not plan to in next 6 months, and have knowledge of mobile wallet Q15: Which of the following reasons prevent you from using a mobile wallet?

5 Of the three-quarters of consumers concerned about security, identity and phone theft are the most pressing concerns People fear theft of information and the physical loss of their phone would compromise security Identity theft Theft of phone and loss of personal information as a result Interception of personal information as you perform a transaction Hacking of mobile phone and loss of data Hacking service provider database and loss of data Getting charged for accidental transactions Security Concerns 70% 60% 57% 52% 34% 19% Include messaging around protecting against identity theft A virus 6% 5 Base: Those who are worried about security Q16: You mentioned security concerns, which of the following concern you? Select the top 3.

6 Driving Adoption: Appeal & Opportunities Successful mobile wallet providers will need to overcome unfamiliarity and fear of new technology, all while offering a clear advantage over more traditional payment methods. Opportunities to drive adoption and appeal lie in: Overcoming security concerns Leveraging location-based services Offering rewards and incentives

7 For the security-conscious, many would be more likely to adopt if they had 100% protection against fraud and theft Increase in likelihood to adopt a mobile wallet Have 100% protection against fraud and theft Have advanced identity management software for your smartphone Have the ability to wipe mobile wallet related data remotely if your phone is lost Have your mobile wallet company monitor your account for unusual transactions and alert you immediately 46% 28% 27% 25% 43% 40% 43% 33% 79% 71% 67% 68% How secure do your consumers feel? Require a PIN to complete the transaction 24% 42% 66% Much more likely Somewhat more likely 7 Base: Those who have knowledge of mobile wallet, have not used a mobile wallet and do not plan to in next 6 months and are worried about security Q17: How much more likely will you be to adopt or continue to use a mobile wallet in the next 6 months if you?

8 Information gathering features, like showrooming, are the most attractive location-based services for mobile wallet users who don t currently plan to adopt Push offers and recommendations don t hold the same appeal as the ability to check pricing Increase in likelihood to adopt a mobile wallet if Check if the products you seek are available in specific stores nearby (Showrooming) 32% 46% 78 78% Compare prices with online and nearby merchants when shopping 30% 47% 77% Receive offers and promotions based on where you are 23% 45% 68% Get recommendations for similar products while shopping 13% 40% 53% Get discounts and deals by joining with other people nearby seeking the same product 12% 34% 46% Much more likely Somewhat more likely 8 Base: Those who have knowledge of mobile wallet, and have not used a mobile wallet and do not plan to in next 6 months Q25b: How likely would you be to adopt a mobile wallet if you could?

9 Location-based services like Foursquare hold appeal, but consumers cite major concerns over privacy and receiving too many alerts Concern over impact of location-based services My privacy Receive too many alerts Battery life of my phone 73% 59% 59% 9 Base: All Respondents Q25: Thinking about location-based services, how concerned are you about location-based services impact on the following?

10 At a minimum, getting the same rewards as they get with their credit cards is enough to increase likelihood to adopt for most consumers Extra rewards and points in addition to those you get with your credit/debit card The same rewards and points as your credit/debit card Customized rewards and points based on your past purchases Rewards and points chosen by your mobile wallet provider Increase in likelihood to adopt a mobile wallet if 20% 15% 24% 34% 52% 42% 55% 46% 66% 67% 75% 80% Extra rewards help people see the benefit of mobile wallets over traditional payment methods Much more likely Somewhat more likely 10 Base: Those who have not waved or tapped mobile phone in past 6 months to pay for a purchase and do not plan to in the next 6 months Q28: How likely would you be to use a mobile wallet if you could get?

11 Designing the Perfect Wallet: Preferred Providers Credit card companies, tech giants, mobile phone providers, banks, and others are all staking their claims in mobile wallet, but what features matter most and who do consumers trust and expect to deliver the best experience?

12 Wallet features like loyalty card management increase likelihood to adopt a mobile wallet, but too many alerts and tips drive adoption down Transaction based coupons, tips and suggestions may have a negative impact on mobile wallet adoption BASELINE The winning combination of mobile wallet features that drives the highest adoption WINNER 68% 73% 56% 43% 46% 37% 19% 25% 27% 60% 40% 20% Somewhat likely to adopt Extremely likely to adopt #1 Perform transactions at the point of purchase instead of using a credit/debit card #2 All the features of #1 PLUS: The ability to store your loyalty cards and other store cards #3 All the features of #2 PLUS: The ability to store other items you have in your wallet (insurance cards, license, gym card etc.) #4 All the features of #3 PLUS: Get tips, suggestions and coupons based on your transaction history 12

13 Banks inspire trust, particularly among the security conscious, but credit card companies and tech giants hold the advantage for convenience and usability Attribute Preferred Provider Security Banks Convenience Credit Card Companies Wallet Features 3 rd Party Discount Providers Ease of Use Credit Card Companies & Tech Giants 13 Base: All Respondents Q30: Which of these categories of companies do you believe will deliver the best service when it comes to the following aspects?

14 Many have an initial preference for credit card companies and banks, but one-third believe mobile service providers can provide good overall service Preferred Mobile Wallet Provider Credit Card Companies 58% Banks 58% Mobile Service Providers (AT&T, Verizon, etc.) 34% PayPal 31% Technology Giants (Google, Amazon, Cisco, etc.) 29% 3rd Party Discount Companies (Level-up, Groupon, etc.) 10% Other 5% 14 Base: All Respondents Q29: Which of the following categories of companies would you prefer to provide you with a mobile wallet service?

15 Amazon and Google who many already trust with payments top the list of tech giants consumers trust for their mobile wallet needs Most Trusted Tech Giant 72% 68% 61% 47% 5% 2% Other 15 Base: Those who prefer technology giant to provide mobile wallet Q29a: Which of the following large technology companies do you trust to provide a mobile wallet?

16 Key Takeaways Although just half of smartphone owners are familiar with the mobile wallet concept, nearly one-quarter of those who are familiar express interest in adopting the technology in the near future Mobile wallet technologies are relatively new to the average consumer and there is still significant resistance to adopting a mobile wallet. However, incentives, including loyalty/rewards points, are especially attractive to consumers who may need to be convinced of mobile wallet s superiority over credit and debit cards. Mobile wallet providers who are willing to offer fraud and theft protection are well positioned to drive adoption among security-conscious mainstream consumers Concerns over security remain a significant barrier to adoption, but the promise of 100% fraud protection significantly allays these fears, driving willingness to adopt. The security-conscious are most likely to choose banks as their preferred provider. Banks are well positioned to leverage their reputations as trusted institutions for less adventurous consumers. Consumers find the benefits of location-based services appealing but privacy, and battery life remain concerns Much touted location-based services are attractive to many potential mobile wallet users, particularly showrooming and other features allowing price comparisons. However, too many alerts and offers are seen as particularly unattractive, a feature allowing the user to limit the number and kinds of offers they receive could be a powerful incentive to adopt. While banks and credit card companies are the clear choice for the security-conscious, opportunities exist for other providers Convenience, cool features, and usability are compelling attributes for many current and prospective users, people who value convenience trust credit card companies, while the more feature-conscious prefer tech giants like Amazon and Google (who many already trust with payments) to provide their mobile wallet. 16

17 About this study Independent Research: Conducted through the CMB Consumer Pulse Data collected from 1,479 smartphone owners, age 18+ in the United States through panel company, Research Now The online sample is weighted to reflect US Census age and gender distributions Data was collected through a 15 minute online questionnaire in January

18 About Chadwick Martin Bailey Chadwick Martin Bailey (CMB), a Honomichl Top 50 Research Firm, is a custom market research firm working with many of the most successful companies in the world to help them acquire, maintain, and grow their customer base. Founded in 1984 in Boston, the company serves clients in more than 30 countries around the globe. Chadwick Martin Bailey focuses on using leading-edge research techniques to collect and translate data into simple, business decision-focused deliverables.

19 Contact us Jim Garrity SVP, Financial Services Practice Leader Follow us on Read our blog at: blog.cmbinfo.com Check us out on Facebook Megan McManaman Marketing Manager South Street, Boston, MA phone fax