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Tipping the Balance Part 1: Consumer Behavior and Mobile Payments

AcxiomAugust 13, 2015

I ended my last blog post talking about the fact that consumers are exceedingly conservative about changing how they pay for goods and services.  When it comes to money, old habits die hard.   I pay the way I pay because I’m used to it and I trust it.  Why try to fix something that isn’t broken?

On the other hand, new payment types – paper money when it replaced coins, checks when they replaced paper cash, debit/credit cards when they replaced checks, and now mobile payments as they replace credit and debit cards – can offer benefits that allow consumers to more easily use, track, and protect our hard-earned cash.  In fact, they must offer unique benefits that current payment types can’t if they ever hope to be widely adopted.  Just because consumers are shifting so much of their behavior to mobile phones – which was the third reason I mentioned for the growing adoption of mobile payments in my original post in this series – and just because there will soon be millions of phones with mobile payments built in, does not mean consumers will shift overnight en masse to paying with their mobile devices.

So what tips the balance?  The best way to find out was to see for myself.  And since I have never felt a need to pay for purchases with my phone, I am an excellent test case for the “middle majority.”  That is, people who see no reason to fix something that isn’t broken and who require a substantial set of benefits to overcome their bias towards the status quo.  Despite being an early adopter of most tech, I am a mobile payments troglodyte.

Let’s start with my (and in this case I mean me, not the generic consumer) motivation for changing from the convenience of payment cards in a physical wallet.  The reality is a wallet today is a pain.  I use multiple payment cards and carry a series of loyalty or other cards (e.g. driver’s license, AAA membership card, my health insurance identification card) that cause my wallet to bulge.  Sitting on it is uncomfortable.  I have to remove the thing when I drive. Getting it out of my back pocket in certain pant designs is almost impossible and embarrassing when I end up futzing with it in checkout lines. Then there is the problem that I am a frequent traveler and have about 50 travel loyalty program cards that I need to carry when I travel.  I actually have a special very large billfold to carry them all in.  And God forbid it gets turned upside down.  I end up playing 52 pickup in my hotel room.

I’d consider adopting anything that could help with these annoyances.  And perhaps that is the first lesson: the issues most consumers have with card-based payments are not huge.  They are low level and repetitive.  Mostly in the background and almost subconscious.  Pointed out – yes we become more aware of them.  But for most things, they are small annoyances that I can overlook. I have no real reason to change. Basically, cards work pretty darned well.

Thus if you want me to change my habits around paying, just giving me a similar set of benefits is not enough.  You have to offer me something more.  Starbucks figured this out.  But what about general mobile payments options?  What do they offer and is it enough?

I tried Google Wallet.  Signup was painful, especially as I had to fund the payment type from my bank account before I even knew if it worked.  So I put my $25 in the account and it didn’t. The money sits there to this day.

PayPal worked, but the interface was kludgy and it seemed to be designed primarily for online ordering via phone.  Moreover, the number of available merchants in my zip code – which is smack in the middle of tech central – was so limited as to make it useless day-to-day.  Much more trouble than just pulling a card from my wallet.

What this taught me was that I needed something that worked first time out of the box, at most merchants, and that was truly contactless without a lot of interaction (e.g. opening an app and typing in a long password).  That is really the minimum requirement for any system.

“Duh,” you say.  That’s obvious.  Sure intellectually.  But what I am talking about here is my emotional reaction.  I couldn’t believe that companies as smart as Google or PayPal could ask me to change how I pay for such a horrid experience.  These are great brands – I so badly wanted them to work, and when they didn’t my response was almost visceral in its intensity.  It was “You’ve got to be kidding me, right?” In fact, it was such a turn off that I almost stopped right there and said “no mobile payments system is worth this.”

Which reinforces my point: how I use money is a very emotional thing, despite what we think about paying as being a fairly rational behavior.  I pay for things every day, multiple times a day.  It is an engrained habit, like brushing my teeth.  Asking me to change evokes an incredibly strong set of emotional barriers to change.  You want me to change my toothbrush?  To do so risks my dental health (and the smile everyone sees).  If I try something new and I perceive it doesn’t work better than what I’ve got, I’m back to my old toothbrush and I’m even less likely to try something new the next time.  It isn’t logical; it’s emotional.

THAT’s why it takes so long to get a new payment mechanic adopted, and why even with Apple Pay and its promise of bringing Apple’s user experience savvy to bear on mobile payments, things are not going to change right away.  It’s got to work and it has to really be better.  I will have almost no patience, and no trust, with anything less.

But they will change, and I will talk next about the positive experience of LoopPay and what it taught me about what has to happen to overcome consumer’s resistance to moving away from payment cards.  (Note: I was supposed to talk about that today, but we didn’t quite get there.  My humble apologies)