Apple Pay & The New Environment for Mobile Payment Apps

Transcription

1 Apple Pay & The New Environment for Mobile Payment Apps November 3, 2014 Greg Weed

2 Events, Timing & Methodology I SEPT 9 Apple Press Conference SEPT CPM Data Collection SEPT 25 iphone6 In-Stores Consumer Payments Monitor Annual Survey (n=4,200) HH Financial Decision Makers Answering for HH or Self Online Survey Sample Weighted to Gov t Data Holistic Household Viewpoints 4 OCT 20 Apple Pay Live November 3 October 2015 EMV Upcoming Tracking Waves 5 Q %-? % -??

3 7 Key Points 1. Massive exposure and high interest levels in iphone 6 and Apple Pay 39% positive PI for iphone6 43% initial positive reaction to Apple Pay 36% positive toward Apple Watch 2. Security and privacy message solves a problem for many Fingerprint and data scrub leading features followed tokenization 3. Beachhead positioning left demand for retailer rewards unaddressed Spectrum of consumer needs with regards to loyalty and payments Delivery of issuer rewards a strong positive (80% spend on rewards cards) 4. In-store apps need to deliver real-time data to the consumer 5. Huge gap between installation and usage (nearly 50%) 6. Consumer hurdles to usage Lingering NFC concerns for many Nearby locations Customer service and technical support importance of issuer leadership Transaction problems 7. The consumer need for choice and control is paramount and at risk 3

4 Today s Focus on Smartphone Owners 65% of households now report owning a smartphone with an average of two phones owned per household. Smartphone Average of 2.1 SP s Owned 44% 55% 65% 69 Million Smartphone HHs + 11 Million HHs vs. Year Ago Pad or Tablet % 34% 41% 87% Millennial HHs Smartphone or Pad/Tablet 50% 63% 71% 4

5 Current OS Battle Lines A forceful Android response to Apple Pay could have enormous market impact. What kind of smartphone do you personally use? ( If you use more than one type, please select the one you use most often ) September 2014 Results August % 56% 53% 47% 43% 39% 40% 39% 37% 38% Total Millennials Generation X Baby Boomers Greatest Generation Android Apple Other or Don't Know 5

6 Smartphones for Financial Transactions Consumers more comfortable using smartphones for financial transactions driven by usage settings more private than mpos. Past-Year Use of Smartphones for Financial Transactions Make a Purchase Pay a Bill Transfer Funds 74% 49% 59% 58% 37% 40% 27% 22% 23% 9% Total Millennials Generation X Baby Boomers Greatest Generation

7 Smartphones for In-Store Purchases The user base for smartphone mpos transactions grew slightly in 2014 compared to year ago (+2 Mil SP HHs). Estimated 2014 user base for wallet payment apps is 9 million households Have you used a smartphone app to make an in-store purchase? 20% 13% 15% 18% 7% 11% 12% 3% 6% 3% Total Millennials Generation X Baby Boomers Greatest Generation

8 Enter Apple Splash & Power 24% 10% 17% 18 Mil HHs Followed Sept 9 Extremely or Very Closely 23% 10% 26 Mil HHs 15% 24% Intend to Purchase iphone6 16 Mil 9 Mil 22% 27% 28% Other 1 Mil As Measured Sept Among Smartphone Households 10 Mil Right Away 16 Mil Contract Exp. 8

9 Initial Consumer Reaction Unprecedented media exposure huge consumer response. Just because it s Apple or.. All Smartphone HHs Users Users Very Positive Somewhat Positive Neutral Negative More Info 23% 21% 30% 11% 15% 30 Mil HHs 30% 26% 26% 6% 12% 15 Mil HHs 20% 18% 32% 15% 16% 13 Mil HHs? As Measured Sept Among Smartphone Households 9

10 Apple Pay Changed the Conversation Transform Security From a Concern to a Consumer End-Benefit. Personal Privacy Over Personalized Retailer Rewards. NFC + Fingerprint + Secure Element + Tokenized Privacy (+Issuer Rewards) Consumers Industry One of Several Barriers for Many Post-Target, Concerted Industry Focus on Security and EMV Consensus Less Secure than Magnetic Stripe Prevalent Idea that Mobile App Value Prop Depends on Retailer Rewards / Shopping Experience Early Wallet Adopters Likely to be NFC Card Users Merchants Low Consumer Demand Security Messaging not in the Forefront Barriers Dissolve as Compelling End Benefit Evolves 10

11 Why Consumers Have Been Cautious How much of a problem is each in your willingness to use a mobile payment app for in-store purchases? 48% Used SP Payment App Primary Credit or Debit Card is NFC 17% All SP HHs Top 3 Box Percentages Not a Problem Major Problem Highest Problem Rating 65% Hacker gets my personal information 61% Transaction hacked while making a purchase 60% Held liable for fraud 57% Lost or stolen phone 57% Giving merchants access to personal information Lowest Problem Rating 40% 46% Phone company giving personal information to gov t Tapping my phone against a merchant terminal 11

12 Security Conversation Front & Center In the consumer world, confidence in payments security is a recovery job not a matter of routine reassurance. Select the features that would most increase your likelihood of using a mobile wallet payments app? Fingerprint ID to open the app Scrub phone & restore on a new phone 57% 57% PIN-protection with lock-out feature 49% Text and notification Tokenization technology* 42% 41% Facial recognition Voice recognition 25% 30% * Tokenization technology that does not transmit your account information but creates an encrypted code to authorize each transactions 12

13 Security Breaches Adding Momentum 78% of smartphone owners feel that security breaches have accelerated and 43% have had a credit or debit card account compromised in some way. How have security breaches changed your attitudes and behavior? Top 3 Box Agreement on a 10-Point Scale 37% 39% 45% 51% Target 81% Aware Home Depot 59% icloud 28% ebay 20% 55% More reluctant to enroll in electronic payment services Less comfortable with personalized suggestions from merchants Less comfortable with location services More worried about giving personal data to merchants Changed password 13

14 Still The Power of Retailer Rewards Despite privacy concerns regarding retailers, the demand is substantial for retailer-driven apps that improve the shopping experience and deliver value. Overall, a suite of app solutions are needed to address spectrum of consumer needs. Which best describes the type of mobile wallet app(s) you would most like to use? 19% Payment-Only App (Issuer Rewards) 32% Shopping-Only App 28% 20% Shopping + Payment App More Than One Type of App Consumer Opt-In Controls 14

15 And Real-Time Consumer Control Consumers are looking for features that put them in control of the shopping and/or payment experience in real time before, during, after the purchase. Please select the must have features that you would like to have on your smartphone payment app? 57% View balance before and after using a debit card 56% View discounts and deals while at a specific store Dynamic application of issuer rewards 50% 47% Apply credit card rewards at the time of purchase Check in-store product pricing and availability Default Card / Default Wallet? 45% 45% Many payment and loyalty cards so you can choose Get cash back from merchant terminals 42% View credit availability before and after using a credit card 33% Order ahead and stores or restaurants to reduce waiting time 15

16 The Untapped Usage Reservoir The challenge ahead for Apple Pay as it was for incumbents is to convert app-installed prospects to actual users. In addition to the 9 million smartphone households using a payment app, an additional 8 million users would be added if the installed base were converted based on estimates from the pre-apple Pay environment. Ready-to use: have phone with native purchase app or downloaded/installed a mobile payments app to the phone. 43% 24% 28% 26% 23% 13% 20% 15% 10% 8% 7% 3% 15% 12% Total Millennials Generation X Baby Boomers Greatest Generation App Ready to Use App Used Affluent HHI $125K+ or IA $250K+ Non-Affluent 16

17 Known Executional Hurdles Still in Play Incumbents experienced consumer friction and so will Apple Pay. Ease of Set-up 61% Very Easy 35% Somewhat Easy 4% Difficult Who s in Charge? Among Ready-to-Use Non-Users Accepted in Enough Places 81% Yes 19% No View Nearby Locations for Apple Pay? Contacted Still Don t Know How to Use Contact Customer Service or Technical Support 36% No 64% Yes 23% % Users Experiencing Transaction Problems 13% 25% Some 62% None Frequent 77% 17

18 Driving a Change in Payment Behavior How will customer experience and service expectations be managed now and over the longer-term? How will consumers be engaged? In-store selling experience Ease of obtaining the number Is there a number on the digital card? Apple Pay Set-Up Barriers for Some Base: iphone Users Have Payment Method Linked to itunes 62% Call-in experience Use Passbook 29% Have Both 24% Apple Pay Has to be User Installed In-App 800 Number or Chat? 18

19 Breach Notification Consumers look to banks and card issuers to notify them in the event of a security breach. Lower Confidence If a security breach occurs, are you confident that you will be notified by.. Higher Confidence 73% 80% 40% 47% Retailer Technology Company Credit Card Issuer Bank 19

20 Questions & Comments Accelerated Performance Through Research Thank You!