People don't use or understand digital wallets: study

The digital wallet has been anointed by many as the future of payments. In the present, however, virtual-pay apps remain largely untouched and misunderstood.

(Credit: CNET)

Only 51 per cent of US consumers are even aware of digital payment providers other than PayPal, and a teeny-tiny percentage of people — 12 per cent spanning all brands — have actually used applications such as Google Wallet, MasterCard PayPass Wallet or Square Wallet, according to a new study from analytics firm ComScore.

ComScore analysed data from a panel of a million US consumers and two separate surveys of US internet users in November 2012 to arrive at its conclusions. For purposes of the study, the firm defined the digital wallet as an entity that stores a virtual copy of wallet content for use in online or offline transactions. The full report is available for purchase, but CNET obtained a copy from ComScore for review.

(Credit: ComScore)

"Digital wallets represent an innovative technology that has not yet reached critical mass among consumers due to a variety of factors, including low awareness and a muddied understanding of their benefits," said Andrea Jacobs, ComScore payments practice leader.

Should the digital wallet find a foothold with consumers, it will be PayPal's market to lose. Seventy-two per cent of survey respondents said that they were aware of the eBay-owned payment facilitator's digital wallet, and 48 per cent indicated that they had used the technology. Compare that to the web and mobile wallet from Google, which placed a distant second with 48 percent awareness and an unremarkable 8 per cent usage among survey participants.

The rest of the digital wallet-makers, ranging from credit card companies, such as MasterCard and Visa to start-ups like Square and LevelUp, all scored so low it's safe to say that people have no idea what these offerings are or why they should use them.

Part of the digital wallet adoption problem appears to be linked to security concerns around hacking or phone and identity theft, issues that providers need to do a better job at addressing. ComScore found that 93 per cent of respondents said that they would prefer to use a digital wallet that has to be unlocked before use, though just 57 per cent were aware that this type of feature was available — even after they reviewed each brand's website.

Jacobs, however, hasn't written off the future potential of digital wallets. "There was a time when consumers were reluctant to use ATMs for similar reasons and today, look at how far we've come since the 1970s and 1980s," she said. "It would seem that the future is bright for digital wallets, but it will require deliberate execution of strategies such as sound marketing for this technology to realise its full potential."

People, in theory, but not yet in practice, want a way to pay with their smartphones. Close to half of the consumers would be willing to pay for purchases via mobile phone, according to ComScore, and 62 per cent of respondents indicated that digital-wallet technology sounds useful.


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Chandler posted a comment   

Depending on your interpretation of "Digital Wallet", I disagree with the statement "Only 51 per cent of US consumers are even aware of digital payment providers other than PayPal, and a teeny-tiny percentage of people — 12 per cent spanning all brands"...

I believe Google Play purchases are routed through Google Wallet, so assuming at least 50% of Android users make purchases through Google Play, around 25% the population (taking Android's market share as around 50%, and assuming this is of the whole population, not just smartphone users)... you get my point :)

Steam, PSN, XBL, Wii, etc. also use digital wallets, proprietary ones that only work within their own ecosystem or even use alternative currency (i.e. points), but still digital wallets (again, depending on your definition...). Even Blizzard with Diablo 3 has a digital wallet system, although its link to real world currency is through Paypal I believe...?

Many people use digital wallets already, they may just not think of them that way or not even realise it...

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