Mobile payments, cashless apps, e-wallets, contactless shopping… there are a lot of terms used to denote the act of paying with an app rather than with traditional cash or card. Cashless apps have been around for several years now, and they continue to grow in acceptance, although that growth is slower than desired.
IDology’s Second Annual Consumer Digital Identity Study shows that only 37% of American consumers frequently carry cash. Eight percent (8%) said they never did, and 24% said they did so infrequently. Perhaps unsurprisingly, older age groups are more likely to carry cash—only about ¼ of younger adults frequently have cash on them.
When asked if they had ever used a cashless app, the majority of respondents (60%) said they had. Women were more likely than men to have used cashless apps (66% of women vs 55% of men). However, only 12% of respondents reported using cashless apps to make the majority of their purchases.
Despite widespread adoption, cashless app usage is still low in the U.S. Analyst firm 451 Research estimates that by 2022, only 3.4% of in-store purchases will be made with mobile apps. Why? Despite the convenience, the relative incentive to use mobile apps is low. Many consumers perceive mobile wallets as just a digital version of their existing credit card, so there is less enticement to use an app rather than a card.
An additional hurdle for cashless apps is their perceived security. Many Americans have concerns about security and privacy (no surprise, considering the number of data breaches in recent years). When asked how secure they believed it was to send money to a friend via a cashless app, 31% said it was only “somewhat” or “not at all” secure. Thirty-eight percent thought it was “extremely” or “very” secure.
China and India have been ahead of the rest of the world in adopting and using mobile payments. A recent Financial Times article explains that the inconvenience of traditional banking coupled with “killer apps” (that blended social, e-commerce and payment functions into one app) drove mobile payments in those countries. What the data from the Consumer Study shows is that there is room for growth when it comes to driving mobile payments in the U.S. Despite adoption, usage is low, which can be traced back to perceptions of ease and security. Apps that can build trust, perhaps through frictionless identity verification methods, are likely to thrive. For more insights into consumer behavior, download the study.