'Digital Wallets' Still Confound Consumers
Three phones displaying the Google Wallet interface.
Despite the big names backing some "digital wallet" payment services, including Google, Visa and MasterCard, the concept has proved elusive to the average Joe.
A report released today (Feb. 4) from analytics firm comScore revealed that aside from PayPal, only 51 percent of 1 million people surveyed were aware of digital wallets, which are designed to replicate the cards in a person's real wallet and are stored in a smartphone app (to pay, customers wave their phone in front of a special terminal at checkout). Only 12 percent of people said they have used a digital wallet other than PayPal.
A second phase of the study instructed participants to read various digital wallet provider websites, including ones belonging to smaller companies such as Square Wallet, ISIS and Lemon Wallet.
But even after reading the material, only 45 percent showed an understanding of the concept of digital wallets. And that's no surprise since only some Android smartphones are equipped with NFC, or near field communication, which allows the device to communicate with the checkout terminal. Some appmakers have stepped in, such as Starbucks, which offers an app with similar capability that can be used on iPhones that don't have an NFC chip. [See also: What Are Mobile Payments?]
One of the biggest concerns about carrying virtual payment cards on smartphones is the fear of unauthorized use. More than 93 percent of consumers said they wanted a digital wallet to have passcode protection. With such a lock, only someone who had the password could open the app and pay for an item. While the digital wallet providers in the study do offer this feature, 43 percent of those surveyed were unaware of passcode protection after reviewing the websites.
But it's still early days for 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," Andrea Jacobs, comScore's lead on mobile payments, said in a statement.