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Consumer Payment Preferences - UK - April 2012

“Banks currently have the edge when it comes to the payment-related elements of the mobile wallet, but history shows that this is likely to be a pretty fragile advantage.”

– Toby Clark, Head of UK Financial Services Research

Some questions answered in this report include:

  • How likely is it that people can be convinced to abandon cash?
  • Will contactless be outdated before it ever hits the mainstream?
  • How do people feel about being upgraded to contactless cards?
  • Do people still use products they don’t trust?
  • Will the US be more open than the UK to a move to mobile payments?
  • Why does interest in mobile payments seem to have fallen back?
  • How does interest in mobile payments differ between men and women?
  • Can Apple make the leap into the payments market?
  • How much can companies learn from their customers?

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Table of contents

  1. Introduction

      • Abbreviations
        • Methodology
        • Executive Summary

            • Current payment preferences
              • A long way from the cashless society
                • Figure 1: Key payment methods used by consumers, February 2012
              • People believe banks should be forced to support cheques
                • Only a quarter of contactless card owners have made a contactless payment
                  • Figure 2: Contactless card ownership, February 2012
                • Payment fraud and security concerns
                  • The fear of fraud is greater than the reality
                    • Figure 3: Payment fraud experiences, February 2012
                  • The comfort of the familiar
                    • Interest in mobile payments
                      • More than two fifths would be interested in mobile-based NFC payments
                        • Figure 4: Interest in making mobile payments, February 2012
                      • Interest has fallen back since 2011
                        • Traditional early adopters lead the way
                          • Acceptance of mobile wallets
                            • Widespread interest in mobile wallet features
                              • Figure 5: Consumer interest in mobile wallet services, February 2012
                            • Banks still own the payments industry
                              • What we think
                              • Issues in the Market

                                  • How likely is it that people can be convinced to abandon cash?
                                    • Will contactless be outdated before it ever hits the mainstream?
                                      • How do people feel about being upgraded to contactless cards?
                                        • Do people still use products they don’t trust?
                                          • Will the US be more open than the UK to a move to mobile payments?
                                            • Why does interest in mobile payments seem to have fallen back?
                                              • How does interest in mobile payments differ between men and women?
                                                • Can Apple make the leap into the payments market?
                                                  • How much can companies learn from their customers?
                                                  • Future Opportunities

                                                    • Letting people forget
                                                      • Making the case for a revolution, not an evolution
                                                      • Technological Developments

                                                        • Key points
                                                          • Contactless cards
                                                            • Contactless roll-out continues
                                                              • Number of retailers expands
                                                                • Mobile payments
                                                                  • Peer-to-peer mobile payments
                                                                    • PayPal
                                                                      • Pingit
                                                                        • Payments Council
                                                                          • NFC-enabled mobile payments
                                                                            • Quick Tap
                                                                              • PayTag
                                                                                • Mobile Wallets
                                                                                  • Project Oscar
                                                                                    • O2 Wallet
                                                                                      • Market challengers
                                                                                        • Square
                                                                                          • PayPal
                                                                                            • Google
                                                                                              • Starbucks
                                                                                                • Apple
                                                                                                • Payment Methods Used by Consumers

                                                                                                  • Key points
                                                                                                    • No hint of a cashless society yet
                                                                                                        • Figure 6: Type of payment methods used by consumers, February 2012
                                                                                                      • More information doesn’t always lead to greater understanding
                                                                                                        • The “credit” element of credit cards worries many
                                                                                                          • Cheques refuse to go away
                                                                                                            • Helping the aged? Or the wealthy?
                                                                                                                • Figure 7: Cheque as a payment method, by age group and household income, February 2012
                                                                                                              • Even the young want the option of being able to write a cheque
                                                                                                                • Figure 8: Agreement with the statement “Banks should be forced to continue to give customers the option of having a chequebook”, February 2012
                                                                                                              • The questionable benefits of “free” banking
                                                                                                                • Using cheque alternatives to maintain control
                                                                                                                  • PayPal is truly mainstream
                                                                                                                    • Consumer-led function creep
                                                                                                                    • Choice of Payment Method

                                                                                                                      • Key points
                                                                                                                        • Coffee is still a cash-only transaction
                                                                                                                          • Figure 9: Payment preferences for different transaction types, February 2012
                                                                                                                        • A rational choice to take the irrational option
                                                                                                                          • Younger people make less distinction between cash and card
                                                                                                                            • The political challenges of moving to a cashless society
                                                                                                                              • Brand intervention in action
                                                                                                                              • Contactless Card Ownership and Use

                                                                                                                                • Key points
                                                                                                                                  • One in 20 have used a contactless credit or debit card…
                                                                                                                                      • Figure 10: Contactless card ownership, February 2012
                                                                                                                                    • … but there is significant interest among non-users
                                                                                                                                      • Do variations in card ownership reflect greater enthusiasm…
                                                                                                                                        • … or a lack of consumer education?
                                                                                                                                          • A lack of awareness presents risks for card issuers
                                                                                                                                            • Frequency of use hints at contactless’ shortcomings
                                                                                                                                              • Figure 11: Type of payment methods used by consumers, February 2012
                                                                                                                                          • Attitudes towards Contactless Cards

                                                                                                                                            • Key points
                                                                                                                                              • Security is a concern…
                                                                                                                                                • … but customer reservations go deeper than fears of fraud
                                                                                                                                                  • Figure 12: Reasons for not using contactless cards, February 2012
                                                                                                                                                • Qualified approval among the early adopters
                                                                                                                                                  • Figure 13: Agreement with the statement “Using my contactless card is more convenient than using chip and PIN”, February 2012
                                                                                                                                                • Will contactless be outdated before it ever hits the mainstream?
                                                                                                                                                  • Seven in ten think that contactless cards should only be issued on request
                                                                                                                                                    • Figure 14: Attitudes towards the issue of contactless payment cards, February 2012
                                                                                                                                                  • Striking a balance between driving use and not alienating customers
                                                                                                                                                  • Experience of Payment Fraud

                                                                                                                                                    • Key points
                                                                                                                                                      • Security is a concern for three fifths of respondents...
                                                                                                                                                        • Figure 15: Attitudes towards payment methods, February 2012
                                                                                                                                                      • ... but are fears of fraud more powerful than fraud itself?
                                                                                                                                                        • Figure 16: Payment fraud experiences, February 2012
                                                                                                                                                      • Cash – the acceptable face of fraud?
                                                                                                                                                        • Past experience makes people more wary...
                                                                                                                                                          • Figure 17: Level of concern over payment fraud, by payment fraud experiences, February 2012
                                                                                                                                                        • ... but it doesn’t stop them from considering new ways of paying
                                                                                                                                                          • Figure 18: Willingness to embrace new payment technology, by payment fraud experiences, February 2012
                                                                                                                                                      • Trust in Payment Security

                                                                                                                                                        • Key points
                                                                                                                                                          • Mobile payments still not seen as secure
                                                                                                                                                            • Figure 19: Security concerns, February 2012
                                                                                                                                                          • Do people still use products they don’t trust?
                                                                                                                                                            • The view from the US
                                                                                                                                                              • Figure 20: Security concerns: A UK/US comparison , November 2011 & February 2012
                                                                                                                                                            • UK incumbents have an advantage over their US counterparts
                                                                                                                                                              • Mobile payments and security: the generation gap
                                                                                                                                                                • Figure 21: Security concerns in using mobile phone as a payment device, by gender, age and smartphone ownership, February 2012
                                                                                                                                                            • Interest in Mobile Payments

                                                                                                                                                              • Key points
                                                                                                                                                                • Almost half show some interest in mobile payments
                                                                                                                                                                  • Figure 22: Interest in making mobile payments, February 2012
                                                                                                                                                                • Interest in mobile payments has stalled
                                                                                                                                                                  • Figure 23: Interest in making mobile payments, 2010-12
                                                                                                                                                                • A risk of over-promising…
                                                                                                                                                                  • … but momentum is building
                                                                                                                                                                    • A familiar set of early adopters
                                                                                                                                                                      • Figure 24: Interest in making mobile payments, by gender, age, location and technology ownership, February 2012
                                                                                                                                                                    • Security is a barrier – but not an insurmountable one
                                                                                                                                                                      • Figure 25: Interest in making mobile payments, by security concerns in using mobile phone as a payment device, February 2012
                                                                                                                                                                    • Preparing for emergencies
                                                                                                                                                                    • Interest in Mobile Wallets

                                                                                                                                                                      • Key points
                                                                                                                                                                        • Moving beyond payment
                                                                                                                                                                            • Figure 26: Consumer interest in mobile wallet services, February 2012
                                                                                                                                                                          • Familiarity with text banking will ease the move to mobile wallets…
                                                                                                                                                                            • … but people are prepared to move beyond the familiar
                                                                                                                                                                              • Just one in nine have no interest at all
                                                                                                                                                                                • Figure 27: Repertoire of consumer interest in mobile wallet services, February 2012
                                                                                                                                                                                • Figure 28: Repertoire of consumer interest in mobile wallet services, by gender, age and technology ownership, February 2012
                                                                                                                                                                              • Moving from “that’s cool” to “that’s useful”
                                                                                                                                                                                • The app advantage
                                                                                                                                                                                  • Figure 29: Interest in mobile wallet features among smartphone and tablet users, February 2012
                                                                                                                                                                                • The payment-shaped gap in Apple’s product offering
                                                                                                                                                                                  • Can Apple make the leap?
                                                                                                                                                                                    • The difference between “I’d be interested” and “I’d apply for that”
                                                                                                                                                                                      • Figure 30: Interest in making mobile payments, by repertoire of consumer interest in mobile wallet services, February 2012
                                                                                                                                                                                  • Preferred Provider of Mobile Wallet Services

                                                                                                                                                                                    • Key points
                                                                                                                                                                                      • Banks still own the payment space
                                                                                                                                                                                          • Figure 31: Preferred providers for mobile wallet services, February 2012
                                                                                                                                                                                          • Figure 32: Preferred providers for mobile wallet services, February 2012
                                                                                                                                                                                        • Younger people more prepared to look to alternative providers…
                                                                                                                                                                                          • … but “best” is not the same as “acceptable”
                                                                                                                                                                                          • Attitudes Towards Payment Methods

                                                                                                                                                                                            • Key points
                                                                                                                                                                                              • The conservative consumer
                                                                                                                                                                                                • Figure 33: Attitudes towards new payment methods, February 2012
                                                                                                                                                                                              • Splitting the security conscious from the trusting
                                                                                                                                                                                                • Figure 34: Consumer attitudes towards payment methods, February 2012
                                                                                                                                                                                              • The Conservative: 38% of the sample
                                                                                                                                                                                                • The Security Conscious: 38% of the sample
                                                                                                                                                                                                  • The Trusting: 38% of the sample
                                                                                                                                                                                                    • Figure 35: Attitudes towards payment methods, by target groups, February 2012
                                                                                                                                                                                                  • Learning from experience
                                                                                                                                                                                                    • Figure 36: Payment fraud experiences, by target groups, February 2012
                                                                                                                                                                                                  • The security conscious are wary – but willing...
                                                                                                                                                                                                    • Figure 37: Interest in making mobile payments, by target groups, February 2012
                                                                                                                                                                                                  • ... and have a strong level of interest in mobile wallet services
                                                                                                                                                                                                    • Figure 38: Consumer interest in mobile wallet services, by target groups, February 2012
                                                                                                                                                                                                  • No signs that the security conscious have greater trust in the banks
                                                                                                                                                                                                    • Figure 39: Preferred providers for mobile wallet services, by target groups, February 2012
                                                                                                                                                                                                • Appendix – Payment Methods Used by Consumers

                                                                                                                                                                                                    • Figure 40: Cash as a payment method, by demographics, February 2012
                                                                                                                                                                                                    • Figure 41: Credit card (using chip and PIN) as a payment method, by demographics, February 2012
                                                                                                                                                                                                    • Figure 42: Debit card (using chip and PIN) as a payment method, by demographics, February 2012
                                                                                                                                                                                                    • Figure 43: Credit card (online) as a payment method, by demographics, February 2012
                                                                                                                                                                                                    • Figure 44: Debit card (online) as a payment method, by demographics, February 2012
                                                                                                                                                                                                    • Figure 45: Cheque as a payment method, by demographics, February 2012
                                                                                                                                                                                                    • Figure 46: Direct debit/standing order as a payment method, by demographics, February 2012
                                                                                                                                                                                                    • Figure 47: Bank transfer as a payment method, by demographics, February 2012
                                                                                                                                                                                                    • Figure 48: PayPal as a payment method, by demographics, February 2012
                                                                                                                                                                                                    • Figure 49: Agreement with the statement ‘Banks should be forced to continue to give customers the option of having a chequebook’, by demographics, February 2012
                                                                                                                                                                                                • Appendix – Choice of Payment Method

                                                                                                                                                                                                    • Figure 50: Payment preferences for cup of coffee, by demographics, February 2012
                                                                                                                                                                                                    • Figure 51: Payment preferences for weekly grocery shop, by demographics, February 2012
                                                                                                                                                                                                    • Figure 52: Payment preferences for electricity bill, by demographics, February 2012
                                                                                                                                                                                                    • Figure 53: Payment preferences for buying a DVD/book/CD on the high street, by demographics, February 2012
                                                                                                                                                                                                    • Figure 54: Payment preferences for buying a DVD/book/CD online, by demographics, February 2012
                                                                                                                                                                                                    • Figure 55: Payment preferences for a holiday, by demographics, February 2012
                                                                                                                                                                                                    • Figure 56: Payment preferences for a new washing machine, by demographics, February 2012
                                                                                                                                                                                                    • Figure 57: Payment preferences for new clothes, by demographics, February 2012
                                                                                                                                                                                                • Appendix – Contactless Card Ownership and Use

                                                                                                                                                                                                    • Figure 58: Contactless card ownership, by demographics, February 2012
                                                                                                                                                                                                • Appendix – Attitudes Towards Contactless Cards

                                                                                                                                                                                                    • Figure 59: Reasons for not using contactless cards, by demographics, February 2012
                                                                                                                                                                                                    • Figure 60: Agreement with the statement ‘Banks should only issue contactless cards when customers specifically request them’, by demographics, February 2012
                                                                                                                                                                                                • Appendix – Experience of Payment Fraud

                                                                                                                                                                                                    • Figure 61: Payment fraud experiences, by demographics, February 2012
                                                                                                                                                                                                    • Figure 62: Agreement with the statement ‘I am worried about being a victim of payment fraud’, by demographics, February 2012
                                                                                                                                                                                                • Appendix – Trust in Payment Security

                                                                                                                                                                                                    • Figure 63: Security concerns in using credit cards as a payment device, by demographics, February 2012
                                                                                                                                                                                                    • Figure 64: Security concerns in using debit cards as a payment device, by demographics, February 2012
                                                                                                                                                                                                    • Figure 65: Security concerns in using mobile phone as a payment device, by demographics, February 2012
                                                                                                                                                                                                    • Figure 66: Security concerns in using contactless payment cards as a payment device, by demographics, February 2012
                                                                                                                                                                                                • Appendix – Interest in Mobile Payments

                                                                                                                                                                                                    • Figure 67: Interest in making mobile payments, by demographics, February 2012
                                                                                                                                                                                                • Appendix – Interest in Mobile Wallets

                                                                                                                                                                                                    • Figure 68: Interest in checking card/bank balance in mobile wallet services, by demographics, February 2012
                                                                                                                                                                                                    • Figure 69: Interest in receiving an instant overdraft alert, by demographics, February 2012
                                                                                                                                                                                                    • Figure 70: Interest in ability to transfer small amounts to friends via your mobile, by demographics, February 2012
                                                                                                                                                                                                    • Figure 71: Interest in ability to store discount vouchers on phone and apply them at the checkout, by demographics, February 2012
                                                                                                                                                                                                    • Figure 72: interest in ability to store other types of cards, by demographics, February 2012
                                                                                                                                                                                                    • Figure 73: Interest in ability to store multiple credit and debit cards in one mobile wallet, by demographics, February 2012
                                                                                                                                                                                                    • Figure 74: Interest in ability to store medical/personal records in case of emergency, by demographics, February 2012
                                                                                                                                                                                                    • Figure 75: Repertoire of consumer interest in mobile wallet services, by demographics, February 2012
                                                                                                                                                                                                • Appendix – Preferred Provider of Mobile Wallet Services

                                                                                                                                                                                                    • Figure 76: Ability to store multiple credit and debit cards in one mobile wallet, by demographics, February 2012
                                                                                                                                                                                                    • Figure 77: Ability to check your card balance before buy something, by demographics, February 2012
                                                                                                                                                                                                    • Figure 78: Instant alert if a purchase would take you over overdraft limit, by demographics, February 2012
                                                                                                                                                                                                    • Figure 79: Personalised offers based on location, by demographics, February 2012
                                                                                                                                                                                                    • Figure 80: Ability to store discount vouchers on phone and apply them at the checkout, by demographics, February 2012
                                                                                                                                                                                                    • Figure 81: Ability to store other types of cards, by demographics, February 2012
                                                                                                                                                                                                    • Figure 82: Ability to store medical/personal records in case of emergency, by demographics, February 2012
                                                                                                                                                                                                    • Figure 83: Ability to transfer small amounts to friends, by demographics, February 2012
                                                                                                                                                                                                • Appendix – Attitudes Towards Payment Methods

                                                                                                                                                                                                    • Figure 84: Target groups, by demographics, February 2012
                                                                                                                                                                                                    • Figure 85: Agreement with the statement ‘I would not be interested in new payment technology – I’m happy with what I’ve got’, by demographics, February 2012

                                                                                                                                                                                                Companies Covered

                                                                                                                                                                                                • Amazon.co.uk
                                                                                                                                                                                                • Apple Computer UK Ltd
                                                                                                                                                                                                • Argos
                                                                                                                                                                                                • Asda Group Ltd
                                                                                                                                                                                                • ASOS (UK retail sales)
                                                                                                                                                                                                • Bank of America Corporation
                                                                                                                                                                                                • Barclaycard
                                                                                                                                                                                                • Barclays Bank plc
                                                                                                                                                                                                • Bebo Inc
                                                                                                                                                                                                • BP p.l.c.
                                                                                                                                                                                                • British Broadcasting Corporation (BBC)
                                                                                                                                                                                                • British Sky Broadcasting Group plc (BSkyB)
                                                                                                                                                                                                • Channel 4
                                                                                                                                                                                                • Citibank
                                                                                                                                                                                                • Co-operative Group
                                                                                                                                                                                                • Comet Group Ltd
                                                                                                                                                                                                • Debenhams (UK and Republic of Ireland)
                                                                                                                                                                                                • Facebook, Inc.
                                                                                                                                                                                                • Foursquare
                                                                                                                                                                                                • FriendsReunited
                                                                                                                                                                                                • Google UK
                                                                                                                                                                                                • J. Sainsbury
                                                                                                                                                                                                • L'Oréal (UK)
                                                                                                                                                                                                • LinkedIn
                                                                                                                                                                                                • MasterCard UK
                                                                                                                                                                                                • McDonald's Restaurants Limited (UK)
                                                                                                                                                                                                • mmO2 plc
                                                                                                                                                                                                • MySpace.com
                                                                                                                                                                                                • Nokia Corporation (UK)
                                                                                                                                                                                                • Ocado
                                                                                                                                                                                                • Orange plc (UK)
                                                                                                                                                                                                • PayPal Inc.
                                                                                                                                                                                                • Pret A Manger
                                                                                                                                                                                                • Research in Motion Uk Ltd.
                                                                                                                                                                                                • Samsung Electronics (UK) Ltd
                                                                                                                                                                                                • Sprint Nextel Corporation
                                                                                                                                                                                                • Starbucks Coffee Company UK Ltd
                                                                                                                                                                                                • Tesco Plc
                                                                                                                                                                                                • Twitter, Inc.
                                                                                                                                                                                                • Visa Europe
                                                                                                                                                                                                • Vodafone Group Plc (UK)
                                                                                                                                                                                                • Waitrose
                                                                                                                                                                                                • WH Smith PLC
                                                                                                                                                                                                • YouTube, Inc.

                                                                                                                                                                                                Consumer Payment Preferences - UK - April 2012

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