What the S-shaped curve of mobile wallets looks like

Original author: Karen Webster
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Three years after its launch, the product is either at the peak of the S-curve or is a failure. This is the classic model of the product life cycle, which you can get acquainted with at a business school.

The author of the article organized a study in order to check how well the Apple product, and the competitors that followed it, passed the S-curve in the US market.

This cycle is shown in the graph above, in the form in which it was first published in an article by Theodore Levitt , economist, marketing expert and professor at Harvard Business School .

And now, three years and four months after the launch of the first publicly available mobile wallet on the market - Apple Pay - the study authors decided that it was time to check how well the Apple product, and its competitors, passed the S-curve test.

The author of the article used her research on the proliferation of mobile devices.

This consumer study of mobile wallet usage activity is being carried out by the authors of the study on a quarterly basis with InfoScout since the launch of Apple Pay in October 2014. You may remember that during the course of the study, the authors interviewed consumers who met the following criteria:

  1. their smartphones support one of four monitored mobile wallets,
  2. they just bought something at a store that accepts one of these four mobile wallets,
  3. they report why they used a particular mobile wallet to purchase, or vice versa, did not.

In other words, the authors of the study watched what people were doing, and then asked them why they did just that. On a quarterly basis, they interview about 2 thousand users of each wallet. As a result, the audience surveyed is approximately 8 thousand consumers.

This project revealed that the spread of Apple Pay since its launch in October 2014 is more like a straight line than an S-curve. As for the growth in the number of Apple Pay transactions, it is generally associated more with an increase in the number of merchants who have installed NFC terminals, rather than with an increase in the interest of iPhone users in this method of payment.

Meanwhile, Walmart Pay is showing results that are more similar to the S-shaped curve, in any case, if we consider it from the point of view of its direct purpose - to pay for purchases at Walmart.

The growth in the distribution and use of mobile wallets in the fourth quarter of 2017
Today, most Americans have a smartphone that supports mobile wallets. Of the 195 million representatives of the adult (over 18) US population, 77.1% have smartphones.

Together, Apple and Samsung account for 70% of the smartphone market, 43.5% and 29.5%, respectively. The market share of Android is 52%, iOS - 43.5%. If we consider these shares taking into account the entire adult population, and not just the adult owners of smartphones, then the distribution is as follows: 33% for Apple, 22.8% for Samsung and 40% for Android.

These numbers are very important to keep in mind when comparing the popularity of the corresponding wallets on all smartphones and the entire adult population of the United States.

It should also be noted that the ability to accept payments using NFC-wallets has grown significantly as a result of the actions of card networks to transfer responsibility for fraud, which provoked merchants to install new terminals that support contactless payments.

In a recent teleconference on Apple’s financial performance, CEO Tim Cook announced that more than half of US retail outlets accept Apple Pay today. These include two-thirds of the companies in the list of hundreds of the largest retailers. The authors of the study have not verified these data, but they assume that they are correct.

In practice, the mere fact of accepting Apple Pay at one point or another means that all other contactless mobile wallets are also probably used in this place, since the main factor in providing access in such cases is the availability of contactless terminals and the desire to connect such payment methods. The lack of acceptance of contactless wallets does not constitute such a serious barrier to their distribution, as before. For example, Samsung Pay technology supports working with old-style terminals that read magnetic tapes on cards, although they do not have data on how often they are used.

The results of the survey of the last quarter, conducted at the end of Christmas together with InfoScout, can be called good. They can be attributed to the Christmas boom, statistical deviations, or they can be called the start of take-off, but one way or another, the good news is still always nice.

The percentage of users who have tried contactless payments has grown a bit.

The emphasis in this sentence should be made on the word a little, because in most cases the growth was so small that statistically it is indistinguishable from earlier results.

The time of the research in the last quarter was chosen in such a way as to study consumer behavior during the holiday week, which lasted from Christmas to New Year. The authors of the study wanted to observe the impact of the holidays on the first attempts to use wallets by new users. Smartphones are often placed under Christmas trees and 2017 proved to be very successful in terms of gifting smartphones.

Therefore, the authors of the study were not surprised when it turned out that more people tried mobile wallets immediately after Christmas, especially given their increased advertising during this period and a greater incentive to try new phones in business.

The influx of new Apple Pay users amounted to 29.4% (compared with 24.8% in the previous quarter), Samsung Pay - 17.2% (13.9% in the previous quarter). Android Pay was first tested by 13.3% of Android smartphone users (versus 11% previously). As for Walmart Pay , here the growth was 24.8% of users of various smartphones (against 23.3% earlier).

It should be remembered that the test of these mobile wallets takes place in stores that accept them, that is, by making real purchases in them.

Unfortunately, the data shows that the lion's share of smartphone users have not tried mobile wallets. More than 70% of iPhone users have never used Apple Pay 40 months after its launch. Yet growth, albeit small, is better than nothing.

The percentage of users who installed mobile wallets and used them in stores when possible was also slightly increased.

For each wallet, the authors of the study calculated the number of cases when consumers with the wallet installed, and used it to conduct the last transaction in the store that accepts this payment method.

In December, 23.1% (versus 22.9% earlier) of iPhone owners used Apple Pay to conduct their last transaction in a store where they had such an opportunity. Explanation: this statistic means that out of 29.4% of users who activated and tried Apple Pay in the last quarter, 23.1% used it when they made their last purchase at a retail outlet where Apple Pay was accepted for payment.

Similar indicators of other wallets: Samsung Pay - 26.8% of users (versus 21.8 previously), Android Pay - 17.3% (versus 15.6% earlier), Walmart Pay - 23.7% (versus 25.6% earlier).

Based on these data, it can be assumed that consumers who bothered to install at least one of the wallets generally showed no more interest in them than in December.

To compare mobile wallets and determine how well they are doing in terms of the S-shaped curve, it is necessary to compare identical concepts.

This means that it is necessary to analyze information for all users in general, without emphasis on specific hardware platforms or operating systems.

Pass the S-curve exam (or at least not overwhelm it)
Walmart Pay's growth path seems to be close to S-shaped. In any case, this statement is true if we consider this wallet in the context of what it was intended for, that is, payment for purchases in Walmart stores.

As shown in Diagram 2 below, the percentage of all U.S. smartphone users who installed Walmart Pay and used it to carry out their latest transaction increased from 3.3% in March 2017 to 5.9% in December 2017.

Almost double growth between March and September indicates just the S-shaped curve. If December was a deviation, then perhaps it is due to the fact that Walmart users have exhausted their balances at the end of the month and started using cash. In this case, growth will continue, and we will soon talk about a new success story, especially against the background of the fact that the product has not turned two years old.

Chart 2. Percentage of smartphone users who installed Walmart Pay and used it to conduct their latest at the time of the purchase survey.

Today, 25% of all adult smartphone users have configured and used Walmart Pay at least once. In December, 5.9% of users used it to make a purchase at the Walmart store.

A limited number of points throughout the country (the application can only be used in network stores) is compensated by the availability of the application for an entire army of smartphone owners, regardless of the brand or operating system of these devices.

Of course, such a scenario is possible in which the further development of Walmart Pay will be slowed down. Nevertheless, the already achieved results of this payment solution stand out from other players.

As for Samsung Pay, its growth, unlike Apple Pay, is not due to the effect of holiday sales of smartphones, but rather to the wider popularity of the company's products and its Samsung Rewards loyalty program.

As for Apple Pay, then, alas, he failed the S-curve exam.

Today, after almost 40 months in the market, the Apple Pay growth curve cannot be called a curve. Yes, she had periods of growth and decline, but overall it is a straight line.

The number of smartphone owners who used Apple Pay to carry out their last purchase transaction increased from 1.9% immediately after launch to 2.6% in March 2015, and 3.0% in December 2017 with some jumps up and down between these timestamps.

These studies show the absence of any signs that iPhone users have begun to show more or less interest in Apple Pay.

Of course, it is also possible that the small December leap actually marked the beginning of the long-awaited growth. But in fact, it is most likely due to the recent launch of new iPhones and new device activations for Christmas. That is, it was the newcomers who tried Apple Pay for the first time, and not the "oldies" who began to show increased interest in the payment system.

But this is not all bad news for the company. The volume of Apple Pay transactions is growing, but this growth occurs as a result of the introduction of new NFC-terminals by merchants, rather than increased interest of users in the product. And this effect will come to naught over time.

In order for Apple Pay to be able to come to its S-shaped curve, iPhone users need to learn how to love this payment method.

You will say that this is a feasible task, since Apple Pay is available not only at Walmart stores, as is the case with Walmart Pay, but at a much larger number of points throughout the country. Walmart accounts for only 7.3% of all US sales, and Apple Pay's upside potential is far greater.

However, it is easy to understand why Walmart is ahead of the competition in terms of active use of the application.

They probably visit Walmart every week (or even more often) to buy groceries and other household and family goods. It is well known that this frequency leads to the formation of a habit.

And besides, Walmart wallet offers more than just launching a payment. It automatically applies discounts and accumulated points during the purchase process and simplifies other aspects of online shopping, allowing you to manage your purchases both online and offline.

What's next?

A few weeks ago Tim Cook reported to shareholders of the company that he was not impressed by the progress of Apple Pay, and if you would have given him such numbers three years ago, he would probably not have believed in them. This was the first recognition from Apple, and in particular from the lips of Cook, indicating that not everything is going smoothly in the country of Apple Pay.

And the thing is that the guys from Cupertino look at the same data as the authors of the study and compare them with the S-shaped curves of products released in the past and in the present.

Let us recall the growth of the iPhone, iPad and iPod in the first three years of their existence.

Following them, the Apple Music service appeared and was launched. Despite the difficult start in 2015, Apple Music is now on the rise, and the release of the smart speaker HomePod certainly contributes to the further growth of its performance.

There is also information that a new generation of AirPods is planned for release in the near future. They are also expected to drive an increase in Apple Music subscriptions.

As for Apple Pay, it cannot even boast of the same results.

Percentage of respondents who tried this or that wallet:
Percentage of respondents who used the wallet more or less regularly:
Previously, the author has already wrote about the need for Apple to get rid of iPhone addiction and that the company cannot always rely on the success of this product alone. In that article, I also expressed the thesis that mobile wallets should follow the user wherever he goes, which means that they can be used on a wide variety of devices, operating systems and channels.

IPhone owners use Walmart Pay. And besides, also Amazon Pay .

Everything goes to the fact that the number of alternative wallets available on the iPhone will only increase over time.

The author suggests that the recent renaming of Android Pay to Google Pay is due to the desire to eliminate any consumer prejudices about where they may or may not use this wallet to pay for purchases. This includes Chrome, which is available as a mobile application on the iPhone, as well as Google Shopping while searching Safari. The author believes that in the future we will see how other payment solutions will also begin to move to similar cross-platform solutions.

Unfortunately, Apple Pay does not work in the opposite direction.

You cannot use Apple Pay at Walmart, in combination with Amazon Pay, with Google, Alexa, or the like voice assistants. The same goes for Samsung smartphones. And it is unlikely that you will ever have this opportunity.

Thus, it turns out that Apple Pay will have to create its S-shaped curve mainly only on its own and in full dependence on a mobile device, which does not prevent consumers from using alternative solutions of competitors.