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

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?

Barriers

consumerpulse

8%

42% 50%

Familiarity with Mobile Wallet

Very familiar

Somewhat familiar

Unfamiliar

16%

22%

62%

Use of Mobile Wallet

Used in past 6 months

Not used, but plan to

Not used, and do not plan to

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

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? 3

consumerpulse

11%

16%

17%

19%

19%

19%

21%

34%

54%

73%

It's too difficult on a small screen

The technology doesn't always work properly

I don't know which app is best

It's not available at stores where I would want to use it

No single payment system across the different merchants

It's not as convenient as using cash or credit card

Credit cards offer me better rewards than mobile wallets

I don't want the store to have my mobile wallet information

I don't want to pay any fees associated with using a mobile wallet

I am worried about security

Barriers to Using Mobile Wallet

For the 62% who don’t currently plan to adopt a mobile wallet, predictably, security tops the list of concerns

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?

Notably, the benefits to adopting mobile wallet, over traditional payment methods, aren’t obvious to most consumers

4

consumerpulse

6%

19%

34%

52%

57%

60%

70%

A virus

Getting charged for accidental transactions

Hacking service provider database and loss ofdata

Hacking of mobile phone and loss of data

Interception of personal information as youperform a transaction

Theft of phone and loss of personal informationas a result

Identity theft

Security Concerns

Of the three-quarters of consumers concerned about security, identity and phone theft are the most pressing concerns

Base: Those who are worried about security ● Q16: You mentioned security concerns, which of the following concern you? Select the top 3.

People fear theft of information and the physical loss of their phone would compromise security

Include messaging

around protecting

against identity

theft

consumerpulse 5

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

consumerpulse

24%

25%

27%

28%

46%

42%

43%

40%

43%

33%

66%

68%

67%

71%

79%

Require a PIN to complete the transaction

Have your mobile wallet company monitor your account forunusual transactions and alert you immediately

Have the ability to wipe mobile wallet related data remotely ifyour phone is lost

Have advanced identity management software for yoursmartphone

Have 100% protection against fraud and theft

Increase in likelihood to adopt a mobile wallet…

Much more likely Somewhat more likely

For the security-conscious, many would be more likely to adopt if they had 100% protection against fraud and theft

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…?

7

How secure do

your consumers

feel?

consumerpulse

12%

13%

23%

30%

32%

34%

40%

45%

47%

46%

46%

53%

68%

77%

78%

Get discounts and deals by joining with otherpeople nearby seeking the same product

Get recommendations for similar products whileshopping

Receive offers and promotions based on whereyou are

Compare prices with online and nearbymerchants when shopping

Check if the products you seek are available inspecific stores nearby (Showrooming)

Increase in likelihood to adopt a mobile wallet if…

Much more likely Somewhat more likely

78

Information gathering features, like “showrooming,” are the most attractive location-based services for mobile wallet users who don’t currently plan to adopt

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…?

Push offers and recommendations don’t hold the same appeal as the ability to check pricing

consumerpulse 8

consumerpulse

Location-based services like Foursquare hold appeal, but consumers cite major concerns over privacy and receiving too many alerts

Base: All Respondents ● Q25: Thinking about location-based services, how concerned are you about location-based services impact on the following?

Concern over impact of location-based services

9

My privacy Receive too many alerts Battery life of my phone

73% 59% 59%

consumerpulse

15%

20%

24%

34%

52%

55%

42%

46%

67%

75%

66%

80%

Rewards and points chosen byyour mobile wallet provider

Customized rewards and pointsbased on your past purchases

The same rewards and points asyour credit/debit card

Extra rewards and points inaddition to those you get with

your credit/debit card

Increase in likelihood to adopt a mobile wallet if…

Much more likely Somewhat more likely

At a minimum, getting the same rewards as they get with their credit cards is enough to increase likelihood to adopt for most consumers

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…? 10

Extra rewards help

people see the benefit of mobile wallets

over traditional payment methods

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?

consumerpulse

Wallet features like loyalty card management increase likelihood to adopt a mobile wallet, but too many alerts and “tips” drive adoption down

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Transaction based coupons, tips and suggestions may have a negative impact on mobile wallet adoption

19% 25% 27% 20%

37% 43% 46%

40%

56%

68% 73%

60%

#1 Perform transactions at thepoint 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 couponsbased on your transaction history

Somewhatlikely to adopt

Extremelylikely to adopt

BASELINE WINNER

The winning combination of mobile wallet features that drives the

highest adoption

consumerpulse

Attribute Preferred Provider

Security Banks

Convenience Credit Card Companies

Wallet Features 3rd Party Discount Providers

Ease of Use Credit Card Companies & Tech Giants

Banks inspire trust, particularly among the security conscious, but credit card companies and tech giants hold the advantage for convenience and usability

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? 13

consumerpulse

Many have an initial preference for credit card companies and banks, but one-third believe mobile service providers can provide good overall service

Base: All Respondents ● Q29: Which of the following categories of companies would you prefer to provide you with a mobile wallet service?

5%

10%

29%

31%

34%

58%

58%

Other

3rd Party Discount Companies (Level-up,Groupon, etc.)

Technology Giants (Google, Amazon, Cisco, etc.)

PayPal

Mobile Service Providers (AT&T, Verizon, etc.)

Banks

Credit Card Companies

Preferred Mobile Wallet Provider

14

consumerpulse

Amazon and Google—who many already trust with payments—top the list of tech giants consumers trust for their mobile wallet needs

72% 68%

61%

47%

5% 2%

Most Trusted Tech Giant

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? consumerpulse 15

Other

consumerpulse

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 16

consumerpulse

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 2013

17

consumerpulse

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.

consumerpulse 179 South Street, Boston, MA 02111 ● 617-350-8922 phone ● 617-451-5272 fax www.chadwickmartinbailey.com

Jim Garrity

SVP, Financial Services Practice Leader

Email: jgarrity@cmbinfo.com

Megan McManaman

Marketing Manager

Email: mmcmanaman@cmbinfo.com

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