Followup: CNBC - Most Americans Don't Use Mobile Payments

This is a followup to our recent articles here and here that discuss how and why most people in the US have not moved towards new payment applications for paying normal daily expenses. CNBC runs this article which again points out that most people are simply happy with the debit and credit card system available to them. Below are some excerpts and then some added comments.

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"Despite growing smartphone dependence, most Americans still aren’t using the devices to pay for things."

. . . . .

"It seems odd considering the ubiquity of iPhones and Androids in the United States. More than 81% of Americans own a smartphone, up from 35% just eight years ago, according to Pew Research Center. While experts say mobile payments in the U.S. will eventually close the gap, they see legacy financial systems, a lack of a need for other options, and rewards cards as major headwinds."

. . . . .

"But in the U.S., the credit and debit card system is well-established and works just fine for most people.

“A big driver of mobile adoption is just how big an improvement is it,” du Toit said. “When it comes to the U.S., there is a good enough solution there already.”

. . . . . 

"U.S. consumers aren’t lacking options when it comes to paying on their phones. There’s Apple Pay, Google Pay, Samsung Pay, PayPal, Venmo, Square Cash, Zelle and newcomers looking to disrupt that entire list. But in order to use these apps, merchants such as coffee shops and retail stores need the proper hardware.

“It’s not the consumer mobile experience — they’ve done a pretty good job,” said Peter Gordon, CEO of PRMPayments. “It’s acceptance, meaning the merchant has to sign up for it. It’s expensive.”

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My added comments: Here again we have a mainstream publication article saying essentially the same thing we have said here on this topic. But really, this is just an example of why ALL change tends to take place gradually. Unless there is some kind of major problem/crisis that causes people to abandon what they have been doing, people tend to stay with what has been working for them. 

This may even offer another reason why the US dollar has become so entrenched globally as the reserve currency of choice. Once anything gets established as the standard, it tends to stay in that position for a long time unless something unusual comes along to disrupt the status quo.

So far, at least in the US, most people are still quite content to use debit and credit card for payments that are denominated in US dollars issued by the Federal Reserve. Here, we just continue to monitor events to see if anything will come along to change that.

Bloomberg - Americans Stick with Credit Cards

Over the last decade all kinds of new efforts to get people to change the way they pay for things have arisen. We have covered many of them here. But this article appearing in Bloomberg notes that, at least in the US, the use of plain old credit cards still wins out. Below are some excerpts and then an added comment.

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"Will anything ever pry old-fashioned credit cards out of Americans’ hands?

Even as the rest of the world embraces the idea of paying for stuff with their smartphones, the U.S. is clinging to its cash and plastic -- so much so that even the nation’s biggest bank is struggling to persuade people to switch. Starting early next year, JPMorgan Chase & Co. customers will no longer be able to use the Chase Pay app to pay with their smartphones when shopping in stores, the bank said Wednesday (8-21-19)."

. . . . 

"In the U.S., digital-wallet transactions represent only 5% of the $2.6 trillion market for in-person purchases and 20% online, while cards accounted for 80% of spending at physical stores and 70% online."

. . . . 

"The U.S. market has been slower to develop partly because merchants have been slow to accept such payments and consumers haven’t found new options convenient enough to give up paying with cards that offer lucrative rewards."

Please click here to read the full article in Bloomberg

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My added comment: The last paragraph quoted above makes a significant point in my view. It's why I use credit cards for most payments and why most everyone I know does as well. Other payment options simply are not competitive in offering sufficient rewards to get people to change engrained behavior (both merchants and end users). I talked about this a bit in this previous blog article that compared using credit cards to using Bitcoin or other similar kinds of payment options.

Blog Reader Alerts Me to New Payments Technologies

One of the benefits of doing a blog like this is that I get emails from readers that are very helpful in pointing me to articles and information that I might otherwise miss. In this case a reader forwarded me links to articles about some interesting new payment systems that will be available in the US. Below are links to those articles along with a brief excerpt from each article.

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AJC.Com - Best Ways to Send Money Online

"With the rise of peer-to-peer payment services like Venmo, splitting the check with friends or reminding your sibling to pay you back isn’t as tiresome as it once was.

The services, which allow users to send money to others online or through apps, continue to gain popularity in the U.S. for their convenience (and the fact that fewer Americans carry cash these days)."

. . . .

"To help you narrow down the best P2P pick for you, we’ve rounded up a guide to the most popular, highly rated apps and services in the tech community."

Click here to read the article for a full review of several apps

USA Today - These Apps Let You Pay Your Friends

"Thanks to our smartphones, there's no longer a need to put that drink purchase from a friend on an imaginary tab, or give them an IOU.

Mobile payment apps are making it a lot easier to give our friends or family cash, whether it's to split a restaurant bill, offer a gift, or settle a bet."

Click here to read about Zelle and more

Business Insider - Here is more on Zelle

My blog reader had this to say about Zelle:

"I think Zelle is just an extension of the ACH transfer process for individuals to allow people to use it free instead of writing checks or using cash, as it appears it was developed by the banks to reduce transaction costs and allow speedy settlement for these P2P deals."

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My added comments: These articles were interesting to me in light of recent comments by Fed Vice Chair Randal Quarles. He seemed to downplay Fed interest in central bank digital currencies and put emphasis on improving existing payments systems in the US. Below is his quote on this from an article in Bankingexchange.com:

"Quarles suggested that any such efforts to develop central bank digital currency would be a distraction from—they “might even derail”—efforts to improve U.S. retail payments. He pointed out that the U.S. still lacks a wide scale system for banks and their customers to make instant and convenient transfers and settlements 24/7."

All of this is also in line from what I hear from a payments system expert who works in this space every day around the world. As banks and central banks delve into this whole topic, they are still trying to decide if a separate "central bank digital currency" is really needed and they all are coming to realize that whatever system they implement must be able to tie in to the existing system and handle the huge volumes of transactions necessary to serve as a legitimate mass scale payments system.

We should understand that some of the Fintech efforts being touted as "blockchain" technology may end up being dead ends when tested in the real world which is why companies like IBM are working with partners on new solutions that emphasize ease of connection into the existing banking and payment systems.

All of this is also in line with this article we recently published that suggests that the world is moving towards more payment options competing to please the end user rather than moving towards one centralized global system at this point in time. Just look at all the competing choices covered in just these two articles forwarded to me by a reader here.