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Consumer Payment Preferences - UK - December 2013

“The introduction of mobile payments on the high street was supposed to lead to a rise in demand for facilitating mobile wallet services. However, there is reason to believe that the order of events may have simply been reversed – it is mobile payments that are the natural progression from mobile wallet services.”

– George Zaborowski, Senior Analyst – Financial Services

Some questions answered in this report include:

  • Why aren’t people embracing mobile payments?
  • What will drive adoption of digital wallets
  • Could payment processing firms be marginalised?

Although there has been a lot of activity in payments since Mintel’s last report on Consumer Payment Preferences in April 2012, many might argue that for consumers, little has changed. The much-hyped debut of mobile payments in 2011, has been met with little fanfare, and interest in the technology has actually fallen back despite it becoming more widely available. What’s more, although contactless payment card and terminal numbers are up, many people are sceptical about the benefits of the technology. Few are convinced that contactless cards are any better than cash or Chip & PIN payment cards.

We are, however, still in the very early stages of a major evolution in the world of payments. Further change and improvement is inevitable. The sheer number and diverse range of companies competing in the sector is direct evidence of this. Banks, payment processing firms, tech giants, mobile network service providers and tech start-ups are all working together or against each other (and sometimes both) to come up with the breakthrough payment technology that truly changes people’s lives.

In this report Mintel studies payments from a number of different angles. It examines how and why people choose to use certain payment methods, their experience with payment fraud, and the payments options they perceive to be the most secure. The report also explores attitudes towards such topics as the future of cash, data privacy, and which companies people would most trust to provide payments. With the current evolution of payments in mind, Mintel measures the current level of consumer interest in newer technologies, such as contactless payments, mobile payments, and a range of mobile wallet services.

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Table of contents

  1. Introduction

      • Abbreviations
      • Executive Summary

          • Key payment methods currently in use
            • Plastic card use rivals that of cash
              • Figure 1: Key payment methods used by consumers, September 2013
            • Overall use of contactless cards is improving…
              • Figure 2: Contactless card ownership, September 2013
            • … but many continue to have their doubts about the technology
              • Payment security concerns
                • Consumers particularly wary of mobile payments and contactless cards
                  • Figure 3: Concern about security, by payment method, September 2013
                • Just over a quarter have experienced payment fraud during the past five years
                  • Figure 4: Consumer experience with payment fraud during the last five years, September 2013
                • Interest in new payment technology
                  • Interest in mobile payments down from last survey
                    • Figure 5: Interest in mobile payments, September 2013
                  • 85% show interest in at least one mobile wallet feature
                    • Figure 6: Interest in mobile wallet services, September 2013
                  • Attitudes towards payments
                    • Figure 7: Any agreement with select statements about payments, September 2013
                  • What we think
                  • Issues and Insights

                      • Why aren’t people embracing mobile payments?
                        • The facts
                          • The implications
                            • It’s not mobile payments that will drive adoption of digital wallets
                              • The facts
                                • The implications
                                  • Could payment processing firms be marginalised?
                                    • The facts
                                      • The implications
                                      • Trend Application

                                        • Dispelling the myths about security flaws
                                          • Coping with disruptive forces in payments
                                            • A sign of things to come from Japan
                                            • Recent Developments in Payments

                                              • Key points
                                                • Contactless cards
                                                  • Number of cards in issue rises to more than 36 million
                                                    • Growth in the number of retailers accepting contactless payments
                                                      • Mobile payment and wallet services
                                                        • Peer-to-peer mobile payments
                                                          • PayPal
                                                            • Pingit
                                                              • Payments Council
                                                                • NFC-enabled mobile payments
                                                                  • EE Cash on Tap
                                                                    • Weve
                                                                      • Visa mobile wallet
                                                                        • Other developments
                                                                          • Google
                                                                            • Apple
                                                                              • MasterCard
                                                                                • PayPal
                                                                                  • Square
                                                                                    • Twitter and Amex
                                                                                      • Clinkle
                                                                                      • Use of Payment Methods

                                                                                        • Key points
                                                                                          • Cash still plays a big role in payments but is just one of many options
                                                                                            • Figure 8: Use of payment methods, September 2013
                                                                                          • Range of payments used continues to evolve
                                                                                            • Figure 9: Repertoire of payment methods used, September 2013
                                                                                          • For the moment nothing rivals the versatility of plastic cards
                                                                                            • The decline of the cheque as a predictor of the long-term future of cash?
                                                                                              • Under-35s driving the evolution of payments
                                                                                                • Figure 10: Any use of select payment methods, by age, September 2013
                                                                                              • Affinity for PayPal shows that resistance to change can be overcome
                                                                                                • Two in five would like to use a service like PayPal on the high street…
                                                                                                  • Figure 11: Level of agreement with the statement “I’d like to be able to use services like PayPal on the high street”, September 2013
                                                                                                • … but the PayPal inStore app has some kinks to work through
                                                                                                • Preferred Payment Method by Type of Transaction

                                                                                                  • Key points
                                                                                                    • Cash for coffee but mostly plastic cards for everything else
                                                                                                      • Figure 12: Use of payment methods by type of transaction, September 2013
                                                                                                    • Debit is the plastic card of choice
                                                                                                      • The higher the purchase cost the more likely a credit card will be used
                                                                                                        • So far contactless cards no threat to cash for low value purchases
                                                                                                        • Trust in the Security of Payment Methods

                                                                                                          • Key points
                                                                                                            • Seven in 10 agree that more technology increases the risk of fraud
                                                                                                              • Figure 13: Level of agreement with the statement “The more technology that’s involved in payments, the greater the risk of fraud”, September 2013
                                                                                                            • Young adults less attached to the notion that new technology is unsafe
                                                                                                              • Unease about mobile payments and contactless cards abounds
                                                                                                                • Figure 14: Concern about security by payment methods, September 2013
                                                                                                              • Owning a smartphone doesn’t do much to ease mobile payment fears
                                                                                                                • Figure 15: Concern about security if using a mobile phone as payment device or contactless payment cards, by select demographics, September 2013
                                                                                                              • People are least worried about services like PayPal
                                                                                                                • Payment detail anonymity makes people feel more secure
                                                                                                                • Experience of Payment Fraud

                                                                                                                  • Key points
                                                                                                                    • Less than three in 10 have been a victim of payment fraud in recent years
                                                                                                                      • Figure 16: Consumer experience with payment fraud during the last five years, September 2013
                                                                                                                    • Consumers are well protected against the most common forms of fraud
                                                                                                                      • Cash-related fraud leaves consumers more exposed to loss
                                                                                                                        • Past experience of fraud heightens fears about using new payment tech
                                                                                                                          • Figure 17: Concern about security by select payment methods, by consumer experience with payment fraud during the last five years, September 2013
                                                                                                                      • Contactless Card Ownership and Use

                                                                                                                        • Key points
                                                                                                                          • A third of adults own a contactless payment card
                                                                                                                            • Figure 18: Contactless card ownership and use, September 2013
                                                                                                                          • Consumers now have more places to actually use the cards
                                                                                                                            • People finally starting to see the point of the technology
                                                                                                                              • Men, under-35s and the affluent pushing contactless forward
                                                                                                                                • Figure 19: Contactless card ownership and use, by demographic profile, September 2013
                                                                                                                              • Three in 10 Londoners have made a payment with a contactless card
                                                                                                                                • Two in five adults don’t want anything to do with contactless technology
                                                                                                                                  • Many likely oblivious to the fact they have a contactless card
                                                                                                                                    • Contactless cards may never truly enter the mainstream
                                                                                                                                    • Attitudes Towards Contactless Cards

                                                                                                                                      • Key points
                                                                                                                                        • Contactless payments being held back by Chip & PIN technology…
                                                                                                                                          • Figure 20: Reasons for not using contactless cards, September 2013
                                                                                                                                        • …and security concerns
                                                                                                                                          • Unfavourable news stories and blog posts raise fears
                                                                                                                                            • Most still believe contactless cards should only be issued by choice
                                                                                                                                              • Figure 21: Level of agreement with the statement “Banks should only issue contactless cards when customers specifically ask for them”, September 2013
                                                                                                                                            • Some risk of alienating customers, but this can be overcome
                                                                                                                                              • Concerns about contactless payments don’t really match up with reality
                                                                                                                                                • Accepting contactless cards can help attract and retain customers
                                                                                                                                                  • Figure 22: Level of agreement with the statement “I’m more likely to use shops/restaurants which accept contactless payments”, September 2013
                                                                                                                                              • Interest in Mobile Payments

                                                                                                                                                • Key points
                                                                                                                                                  • Nearly two in five interested in mobile payments
                                                                                                                                                    • Figure 23: Interest in mobile payments, September 2013
                                                                                                                                                  • Interest fading as initial launch of mobile payments fails to impress
                                                                                                                                                    • Figure 24: Interest in mobile payments, 2010-13
                                                                                                                                                  • Despite a flawed introduction, mobile payments have a bright future
                                                                                                                                                    • More than half of under-35s interested in mobile payments
                                                                                                                                                      • Figure 25: Interest in mobile payments, by select demographics, September 2013
                                                                                                                                                    • Positive feedback on security by early users vital for wider adoption
                                                                                                                                                      • Figure 26: Concern about security by payment methods, by Interest in mobile payments, September 2013
                                                                                                                                                  • Interest in Mobile Wallet Services

                                                                                                                                                    • Key points
                                                                                                                                                      • Healthy levels of interest in mobile wallet services
                                                                                                                                                        • Figure 27: Interest in mobile wallet services, September 2013
                                                                                                                                                      • With instant alerts, the role of mobiles in finance becomes more tangible
                                                                                                                                                        • Most interest focused on the non-payment aspect of mobile wallets
                                                                                                                                                          • Seven in 10 smartphone users open to receiving personalised offers
                                                                                                                                                            • Figure 28: Interest in mobile wallet services, by smartphone users, September 2013
                                                                                                                                                          • 55% show interest in seven or more mobile wallet services
                                                                                                                                                            • Figure 29: Repertoire of interest in mobile wallet services, September 2013
                                                                                                                                                            • Figure 30: Repertoire of interest in mobile wallet services, by select demographics, September 2013
                                                                                                                                                          • A positive link between interest in wallet services and mobile payments
                                                                                                                                                            • Figure 31: Interest in making mobile payments, by repertoire of consumer interest in mobile wallet services, September 2013
                                                                                                                                                        • Attitudes Towards Payments

                                                                                                                                                          • Key points
                                                                                                                                                            • Resistance to change is strong…
                                                                                                                                                              • Figure 32: Any agreement with select statements about payments, September 2013
                                                                                                                                                              • Figure 33: Level of agreement with the statement “I don’t see any need to change the way we pay for things since it works fine as it is”, September 2013
                                                                                                                                                            • … yet many think more should be done to improve efficiency
                                                                                                                                                              • Figure 34: Level of agreement with the statement “I think that payment companies should be doing more to make payments more convenient and efficient”, September 2013
                                                                                                                                                            • 29% of under-35s say they’re ready to give up cash
                                                                                                                                                              • Figure 35: Level of agreement with the statement “I’d prefer to be able to stop using cash altogether”, September 2013
                                                                                                                                                            • Less affluent more attached to cash
                                                                                                                                                              • Mixed feelings about the long-term future of cash
                                                                                                                                                                • Data privacy is an issue for 55% consumers
                                                                                                                                                                  • Figure 36: Level of agreement with the statement “I am uncomfortable with the amount of data that is collected about my spending habits”, September 2013
                                                                                                                                                                • Established firms have the edge in payments but this is eroding
                                                                                                                                                                  • Figure 37: Level of agreement with the statement “I wouldn’t trust anyone other than banks or established credit card companies when it comes to making payments”, September 2013
                                                                                                                                                                • Payment processing firms under threat
                                                                                                                                                                • Appendix – Use of Payment Methods

                                                                                                                                                                    • Figure 38: Use of payment methods – Any plastic card, by demographics, September 2013
                                                                                                                                                                    • Figure 39: Use of payment methods – Any Chip & PIN, by demographics, September 2013
                                                                                                                                                                    • Figure 40: Use of payment methods – Any online plastic card, by demographics, September 2013
                                                                                                                                                                    • Figure 41: Use of payment methods – Cash, by demographics, September 2013
                                                                                                                                                                    • Figure 42: Use of payment methods – Debit card, by demographics, September 2013
                                                                                                                                                                    • Figure 43: Use of payment methods – Direct debit/standing order, by demographics, September 2013
                                                                                                                                                                    • Figure 44: Use of payment methods – Debit card (online), by demographics, September 2013
                                                                                                                                                                    • Figure 45: Use of payment methods – PayPal, by demographics, September 2013
                                                                                                                                                                    • Figure 46: Use of payment methods – Credit card, by demographics, September 2013
                                                                                                                                                                    • Figure 47: Use of payment methods – Bank transfer, by demographics, September 2013
                                                                                                                                                                    • Figure 48: Use of payment methods – Cheque, by demographics, September 2013
                                                                                                                                                                    • Figure 49: Use of payment methods – Credit card (online), by demographics, September 2013
                                                                                                                                                                    • Figure 50: Use of payment methods – Barclays Pingit, by demographics, September 2013
                                                                                                                                                                    • Figure 51: Use of payment methods – Barclaycard PayTag, by demographics, September 2013
                                                                                                                                                                    • Figure 52: Use of payment methods – Bitcoin, by demographics, September 2013
                                                                                                                                                                    • Figure 53: Agreement with the statement ‘I’d like to be able to use services like PayPal on the high street’, by demographics, September 2013
                                                                                                                                                                  • Repertoire
                                                                                                                                                                    • Figure 54: Repertoire of use of payment methods, by demographics, September 2013
                                                                                                                                                                • Appendix – Preferred Payment Method by Type of Transaction

                                                                                                                                                                    • Figure 55: Use of payment methods by type of transaction – Cup of coffee, by demographics, September 2013
                                                                                                                                                                    • Figure 56: Use of payment methods by type of transaction – Your weekly grocery shop, by demographics, September 2013
                                                                                                                                                                    • Figure 57: Use of payment methods by type of transaction – A meal out, by demographics, September 2013
                                                                                                                                                                    • Figure 58: Use of payment methods by type of transaction – Buying a DVD/book/CD, by demographics, September°2013
                                                                                                                                                                    • Figure 59: Use of payment methods by type of transaction – A holiday, by demographics, September 2013
                                                                                                                                                                    • Figure 60: Use of payment methods by type of transaction – A new washing machine, by demographics, September°2013
                                                                                                                                                                    • Figure 61: Use of payment methods by type of transaction – New clothes, by demographics, September 2013
                                                                                                                                                                • Appendix – Trust in the Security of Payment Methods

                                                                                                                                                                    • Figure 62: Agreement with the statement ‘The more technology that’s involved in payments, the greater the risk of fraud’, by demographics, September 2013
                                                                                                                                                                    • Figure 63: Concern about security by payment methods – Using my mobile phone as a payment device, by demographics, September 2013
                                                                                                                                                                    • Figure 64: Concern about security by payment methods – Using contactless payment cards as a payment device, by demographics, September 2013
                                                                                                                                                                    • Figure 65: Concern about security by payment methods – Using debit cards as a payment device, by demographics, September 2013
                                                                                                                                                                    • Figure 66: Concern about security by payment methods – Using credit cards as a payment device, by demographics, September 2013
                                                                                                                                                                    • Figure 67: Concern about security by payment methods – Using non-bank payment services, by demographics, September 2013
                                                                                                                                                                • Appendix – Experience of Payment Fraud

                                                                                                                                                                    • Figure 68: Consumer experience with payment fraud during the last five years, by demographics, September 2013
                                                                                                                                                                  • Repertoire
                                                                                                                                                                    • Figure 69: Repertoire of consumer experience with payment fraud during the last five years, by demographics, September 2013
                                                                                                                                                                • Appendix – Contactless Card Ownership and Use

                                                                                                                                                                    • Figure 70: Contactless card ownership, by demographics, September 2013
                                                                                                                                                                • Appendix – Attitudes Towards Contactless Cards

                                                                                                                                                                    • Figure 71: Reasons for not using contactless cards, by demographics, September 2013
                                                                                                                                                                    • Figure 72: Agreement with the statement ‘Banks should only issue contactless cards when customers specifically ask for them’, by demographics, September 2013
                                                                                                                                                                    • Figure 73: Agreement with the statement ‘I’m more likely to use shops/restaurants who accept contactless payments^’, by demographics, September 2013
                                                                                                                                                                • Appendix – Interest in Mobile Payments

                                                                                                                                                                    • Figure 74: Interest in mobile payments, by demographics, September 2013
                                                                                                                                                                • Appendix – Interest in Mobile Wallet Services

                                                                                                                                                                    • Figure 75: Interest in mobile wallet services – Ability to check your card/bank balance on your mobile phone before you buy something, by demographics, September 2013
                                                                                                                                                                    • Figure 76: Interest in mobile wallet services – Instant notification if a purchase would take you over your overdraft limit, by demographics, September 2013
                                                                                                                                                                    • Figure 77: Interest in mobile wallet services – Ability to transfer small amounts to your friends via your mobile, by demographics, September 2013
                                                                                                                                                                    • Figure 78: Interest in mobile wallet services – Ability to store discount vouchers on your phone and apply them at the checkout, by demographics, September 2013
                                                                                                                                                                    • Figure 79: Interest in mobile wallet services – Ability to store other types of cards in the same mobile wallet, by demographics, September 2013
                                                                                                                                                                    • Figure 80: Interest in mobile wallet services – Ability to store multiple credit and debit cards in one mobile wallet, by demographics, September 2013
                                                                                                                                                                    • Figure 81: Interest in mobile wallet services – Ability to store medical/personal records in case of emergency, by demographics, September 2013
                                                                                                                                                                    • Figure 82: Interest in mobile wallet services – Ability to store electronic receipts/warranty documents etc for purchases that you have made, by demographics, September 2013
                                                                                                                                                                    • Figure 83: Interest in mobile wallet services – Personalised offers based on your shopping habits and location, by demographics, September 2013
                                                                                                                                                                  • Repertoire
                                                                                                                                                                    • Figure 84: Repertoire of Interest in mobile wallet services, by demographics, September 2013
                                                                                                                                                                • Appendix – Attitudes Towards Payment

                                                                                                                                                                    • Figure 85: Agreement with the statement ‘I don’t see any need to change the way we pay for things since it works fine as it is’, by demographics, September 2013
                                                                                                                                                                    • Figure 86: Agreement with the statement ‘I think that payment companies should be doing more to make payments more convenient and efficient’, by demographics, September 2013
                                                                                                                                                                    • Figure 87: Agreement with the statement ‘I wouldn’t trust anyone other than banks or established credit card companies when it comes to making payments’, by demographics, September 2013
                                                                                                                                                                    • Figure 88: Agreement with the statement ‘I am uncomfortable with the amount of data that is collected about my spending habits’, by demographics, September 2013
                                                                                                                                                                    • Figure 89: Agreement with the statement ‘I’d prefer to be able to stop using cash altogether’, by demographics, September 2013

                                                                                                                                                                Companies Covered

                                                                                                                                                                • American Express Company (The)
                                                                                                                                                                • Apple Retail UK
                                                                                                                                                                • Barclays Bank plc
                                                                                                                                                                • Facebook, Inc.
                                                                                                                                                                • Google UK
                                                                                                                                                                • MasterCard Incorporated
                                                                                                                                                                • PayPal Inc.
                                                                                                                                                                • Starbucks Coffee Company UK Ltd
                                                                                                                                                                • Twitter, Inc.
                                                                                                                                                                • Visa Europe

                                                                                                                                                                Consumer Payment Preferences - UK - December 2013

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