More than 81% of people in the U.S. own a smartphone, according to Pew Research Center. Just eight years ago, that percentage was 35%. It’s functioned as, and often even replaced, the modern computer, telephone, calculator, gaming console, television, GPS, camera, wristwatch, and CD player —  and it all fits into your pocket.

But Americans are still skeptical of it replacing their wallet. In 2018, only 20% of U.S. adults (55 million) were estimated to be using mobile payment technology, which stores your debit and credit card information in an app and allows you to tap your phone to a card reader instead of swiping or inserting a card. In a separate survey from CivicScience, only 1% of U.S. respondents cited mobile payment apps as their primary payment method. 

Apple introduced Apple Pay in 2014, with Android Pay (now Google Pay) and Samsung Pay following a year later. These apps held the potential to revolutionize the consumer finance, tech, and retail industries. Yet, five years later, only 29% of U.S. smartphone users were expected to make a mobile payment, putting the U.S. in sixth place in the world for mobile payment adoption. The venture capital firm Loup Ventures estimates that among global iPhone users, only 43% have enabled Apple Pay.

Meanwhile, consumers in Asian countries like China and India have jumped on the technology in recent years. According to eMarketer, over 80% of smartphone users in China make payments with their phones, embracing technological innovation in a country whose spending power is rising. How has the introduction of this technology had such vastly different outcomes in two of the world’s biggest economies?

Retailers Slow to Adopt Mobile Payments

Despite early excitement about the future of mobile wallet technology, progress has been slow going — in no small part due to skittishness on the part of retailers. 

“Consumers aren’t going to use the technology as widely because every time they go into a different store they have to figure out if the store accepts mobile payments, and if it accepts the mobile payment system they are using,” says Justin Etheredge, partner at Simple Thread.

In the past five years (in response to security breaches such as the large-scale 2013 Target data breach), retailers have updated their point-of-sale hardware to accommodate EMV chip cards and phase out the less secure magnetic stripe technology of yesteryear’s cards. While these new POS systems do have near field communication (NFC) technology (which allows for contactless transactions), retailers have been slow to opt into the software updates that would let customers pay with Apple Pay, Google Pay, and Samsung Pay, according to Forbes.

Most major retailers, such as Target, Walgreens, Costco, Best Buy, and Kohl’s, have adopted Apple Pay by now, but there have been notable holdouts, like Walmart, which launched its own mobile wallet in 2015.

Merchants receive limited user data from tech companies like Apple, Google, and Samsung, and aren’t able to distinguish which third-party app was responsible for the transaction. “All the valuable customer purchase data stays at Apple and not the retailer,” Victor Gevers, cybersecurity researcher and chairman of the GDI Foundation, told Digiday. Therefore, it’s more beneficial for retailers to have their own apps, which can offer exclusive deals to customers and an unmediated view into how people are shopping.

The deals aspect can’t be overstated — customers want to see benefits if they’re expected to change their habits. Starbucks was an early adopter of mobile payments, allowing users to pre-load funds onto a Starbucks app and receive loyalty rewards for each transaction. As a result, Starbucks is the top mobile payment app in the U.S. with 23.4 million users, according to eMarketer.

How Other Countries Have Made the Jump

The reluctance to switch payment methods isn’t universal. China had a mobile payment user penetration rate of 79.4% in 2018, and countries like India, Japan, South Korea, Indonesia, and Australia are expected to see percentage increases of more than 2% year-over-year, according to eMarketer.

China and India both occupy interesting places at the intersection of finance and tech. The adoption rates for credit cards and bank accounts are low, as most people in those countries tend to deal in cash. They’re also mobile-first, meaning that people’s first (and often only) exposure to the internet is through mobile devices. So the leap from cash to the mobile wallet is much larger, but it’s a significant quality-of-life improvement that American credit card users wouldn’t necessarily see from switching to Apple Pay or Google Pay.

“It’s more transformational progress, whereas in the U.S. mobile payments are merely an incremental step above the widespread and already-convenient use of debit and credit cards,” says Ryan Brinks, the banking and investing publisher for Finder.com

There’s also a difference in the role these apps play in people’s lives. For example, the top mobile payment systems in China are WeChat Pay and Alipay, which are both extensions of the highly popular messaging and e-commerce apps (to put this into perspective, WeChat has one billion monthly active users). Together, the two apps command 94% of the mobile payment market in China, according to Bloomberg.

Brinks explains that these payment methods offer a better user experience because they’re “integrated within an all-in-one app that encompasses e-commerce, social media, and more” while the U.S. market is “fragmented” and requires you to download separate apps.

What it Would Take for the U.S. to Switch

Consumers know mobile payment apps exist, but they’re not yet convinced they’re worth it. Increasing merchant access would help.

“The most successful mobile payment systems share a strong merchant network. This ensures safety and streamlines efficiency for merchants and customers alike,” says Milos Varaklic, vice president of operations at MDG, an e-commerce platform.

However, there is something of a chicken-and-egg problem in the U.S. To get consumers on board with mobile wallets like Apple Pay and Google Pay, retailers will have to pony up and enable the technology that allows these contactless transactions to happen. But stores likely won’t do this until they see enough consumer demand that their lack of mobile wallet payment options becomes a liability.

As writer Kyle Chayka pointed out in Pacific Standard in 2014: “The apps are attempting to solve a problem that doesn’t necessarily exist.” The data shows people are fine with the small inconvenience of pulling out their wallets at the cash register. However, if Apple Pay, Google Pay, and Samsung Pay offered concrete incentives to use the apps (similar to Starbucks), that could move the needle. 

The U.S. market for mobile payments is still expected to grow through 2023 (albeit at a slow pace compared to other countries), but if Silicon Valley desperately wants the mobile wallet to happen, they’ll have to make it worth their customers’ while.

What’s Next?