(New York, NY): Mobile pay users are an enthusiastic bunch, but admit they sometimes forget to choose mobile payments at checkout. New data from Auriemma Group’s Mobile Pay Tracker suggests that transaction-based incentives may provide the nudge needed to get higher frequency and spend through mobile pay. The study of 1,505 mobile pay eligible cardholders didn’t just reveal incentive’s benefits to Pay providers, but to issuers and merchants as well. Those who leverage incentives are positioning themselves for greater success as mobile payments become more commonplace.
Regardless of who funds the incentives, issuers, merchants, and Pay-app providers all have something to gain. Increases in mobile pay spend and frequency of use will have a marked impact on the most frequently used (MFU) card in the mobile wallet, while also encouraging use of mobile pay instead of a physical wallet. As the mobile pay user population grows, it will become increasingly important to be the top of mobile wallet card. Interestingly, two-thirds of mobile pay users already say that the MFU card in mobile pay is also their most used card overall.
“While cards used in the mobile wallet benefit from merchant- and Pay-funded incentives in the short term, those not already being used could miss out, especially as mobile pay grows,” said Jaclyn Holmes, Director of Auriemma’s Payment Insights. “Pay apps very well may be the future of payments. Incentives provide an opportunity for issuers and merchants to have consumers associate their brand with the payment method, which could turn out to be a valuable long-term investment.”
Currently, 25% of consumers with an eligible smartphone use mobile pay, mostly composed of a highly covetable demographic of employed, affluent, and college-educated consumers. Of these consumers, 32% recall being offered a mobile pay incentive (compared to 19% earlier in the year), and when the incentive is offered, the take rate is high: 86% of incentive recipients report claiming the incentive at the point of sale in-store or in-app.
In the past, these incentives were primarily offered by banks, but in Auriemma’s most recent study the proportion of banks offering incentives to their customers compared to last quarter dropped from 58% to 40%. Merchant-funded offers are now most prevalent (46%), and regardless of who offered the incentive, nearly eight in ten respondents (78%) report their offer was linked to a specific merchant. Many consumers, however, are not seeking these incentives out—most hear about them from friends, or through emails or letters.
Consumers who are offered incentives, unsurprisingly, use mobile payments more frequently than those not offered—demonstrating a clear influence on choice of payment method at checkout. Over a one-week period, for example, those who received an incentive to use mobile pay in-store did so 4.6 times, compared to 3.1 times for those not offered an incentive. The same is true of in-app purchases, with incentivized shoppers purchasing four times in a week, compared to 2.4 for those not offered an incentive.
“Incentives can give consumers the push they need to use mobile pay,” said Holmes. “Their greatest impact will be on consumers on the cusp of using the method, but who need an additional nudge.”
This study was conducted online within the US by an independent field service provider on behalf of Auriemma Consulting Group in November 2016, among 1,505 mobile pay eligible consumers. Respondents were screened to own an iPhone 7/7+/6/6+/6s/6s+ or Apple Watch (in combination with an iPhone 5/5C/5S) – a Samsung Galaxy S7, S7 Edge, S7 Active, a Samsung Galaxy S6, S6 Edge/Edge+, S6 Active or Galaxy Note 5, Note 7 – and/or other Android phone with KitKat (4.4) OS or newer. All respondents also have a general purpose credit card in their own name. In addition to the quantitative web survey, ten in-depth interviews (IDIs) were conducted during December 2016.
About Auriemma Group
Auriemma is a boutique management consulting firm with specialized focus on the Payments and Lending space. We deliver actionable solutions and insights that add value to our clients’ business activities across a broad set of industry topics and disciplines. For more information, call Jaclyn Holmes at 212-323-7000.