The U.S. is falling behind much of Asia – especially China – when it comes to mobile wallet adoption, and the gap is growing wider. According to recent statistics,
less than a quarter
of Americans have embraced mobile wallets, compared to
nearly half of the Chinese population
. The failure to make mobile payments mainstream in the U.S. isn’t for lack of trying; Apple Pay, Google Pay, Square, and others have spent billions on customer acquisition with little success, even though the overwhelming majority of Americans could benefit from switching to mobile wallets – especially if making that switch meant giving up their credit cards.
Mobile wallets are generally much safer and more secure than other forms of payment. Cash can be lost or stolen with no recourse and its cost to produce and manage is a growing concern. Credit cards are susceptible to fraud, difficult to use internationally, and their incentives are disadvantageous to most consumers.
China is rapidly becoming a global leader in technological innovation, but that alone doesn’t explain its success with mobile payments compared to the U.S. Clearly there are other factors at play; many are deep-seated cultural differences that have little to do with technology. After working on my own mobile wallet for small businesses, I’ve seen that recognizing and understanding these distinctions is the best shot American companies have at making mobile payments the status quo. Here are five key considerations.
1. Credit Card Penetration
Americans, particularly millennials, are easily seduced into signing up for credit cards, especially those offering rewards. Around 57% of Americans have at least one rewards card, but only 41% pay their balance in full each month. That means they’re paying about 17% interest to receive about 2% cash back. An estimated 55% of American credit card holders carry debt; 10% owe $5,000 or more. Only those who can afford to pay their balances off every month actually benefit from credit card rewards.
The Chinese, on the other hand, are not prolific credit card users. In fact, many have bypassed credit cards entirely, opting to switch from cash to mobile wallets that essentially act like debit cards. The concept is simple: spend what you have and avoid borrowing unless absolutely necessary.
2. Design Complexity
One mobile payment system that has caught on in the U.S. is the Starbucks app, which lets users pay from their prepaid accounts with the swipe of a simple QR code. The more complicated a mobile payment platform’s design is, the less likely it is to gain mainstream adoption. While many failed U.S. mobile payment platforms over-complicated their designs with radio-frequency identification (RFID) and near field communication (NFC) technology, the Chinese have made things simple with QR codes that are fast and easy to use.
3. Platform Competition
Almost all mobile transactions in China are completed over WeChat Pay or Alipay. In the U.S., multiple competing platforms that are specific to either Apple or Android aren’t conducive to unanimity. Consumers want a unified experience that is widespread and dependable. When companies compete at the expense of consumer needs, people are less willing to sign on to any platform – even those that work with their devices. A mobile wallet must be platform agnostic to succeed in the U.S. and globally.
4. Privacy Concerns
Mobile payment platforms that act as proxies to users’ checking accounts and require multi-factor authentication are safer than tangible credit cards that can be lost or stolen and used without any authentication. Yet only 12% of Americans trust mobile payment applications. Furthermore, only 25% of Americans are willing to share data with web and mobile applications for increased convenience and customization, while 38% of Chinese consumers are amenable to sharing data.
5. Risk Aversion
Despite a relative disinterest in credit cards, other recent social and technological innovations suggest the Chinese may be less risk-averse than Americans. China’s social credit system coupled with its widely deployed facial recognition technology is considered “dystopian” by many Americans who believe the risk isn’t worth the reward. But the fact remains that China is pursuing technological innovations in all facets of society much faster than the U.S.
If mobile wallets become an American staple, they will do so alongside a significant culture shift away from our infatuation with credit cards and fear of technology. As China continues to surge in innovation and Americans mount more credit card debt, that shift becomes more likely every day.