Millennial babies were the first generation born into the technology revolution, and they are also considered the vanguard when it comes to new technologies with mobile wallets being no exception. Over 50% of Millennials report they feel their generation is the first to try new technology (1), and 24% of Millennials claim technology use is the first factor that makes their generation unique. (2)
The eagerness to adopt new technology coupled with the spending power of the millennial generation makes them an unstoppable force. This generation of 18-to-36 year-olds rivals the Baby Boomer generation in number. There are 77 million Millennials in the United States, or roughly 24% of the country’s population. (2) It is estimated that Millennials will have the most spending power of any generation by 2018 – just two years away from where we are today – with a spending power of $3.39 trillion. (3) Millennials are aging and gaining more stability in the world. Therefore, their long-term purchasing power is also growing as they achieve each of life’s milestones.
Today, new technology is generally quick to take-off, because it makes our lives easier. Millennials especially recognize the inherent role technology plays in relieving the burdens of day-to-day life. More than 74% of Millennials reported they feel new technology makes their life easier. (2) The mobile wallet is an important groundbreaking innovation that is enhancing daily lifestyles by removing cash and cards from a consumer’s physical wallet. Therefore, more and more people are turning toward the mobile wallet’s built-in convenience.
The millennial stereotype is that of a twenty-something with a phone glued to his or her hand, but the stereotype has more accuracy than we might actually believe. Millennials touch their smartphones an average of 45 times per day, (4) and Nielsen reports that 83% of Millennials have stated they sleep with their smartphones. Furthermore, Millennials are 1.5 times more likely to own an iPhone. (2)
With the tech savvy Millennials being some of the first consumers to acknowledge the vital role technology plays in modern society, it is only natural this generation would also be quick to use their phone for payments. 41% of Millennials reported having made purchases with their smartphones (3) and 56% of Millennials have already adopted alternative payment services such as Venmo or PayPal. (5)
While many Millennials have already embraced the new technology, even more are likely to do so in the future. A survey conducted by FICO found that 32% of Millennials are likely to use mWallet services within the next year. (5)
Mobile payment technology, much like the millennial generation that has helped to boost its adoption, has tremendous potential. The technology is primed for rapid growth as Millennials gain more and more power. Catering to this insatiable consumer demographic will help to bring about further adoption of the technology, along with increased innovation in mobile payments. Indeed, it is predicted that transactions via mobile payment technologies will reach 9.9 billion in 2018. (6)
However, with all the propensity of the millennial generation to adopt new technology, mobile payments have been slower to emerge within other consumer groups. Apple Pay has been on the market since October 2014, and despite its convenience, only one in 50 iPhone 6 owners use Apple Pay on a regular basis. (7)
Moreover, there is a strong disparity in the awareness of mobile payment technology and those who actually use available apps. A recent Accenture survey found that 52% of North Americans are “extremely aware” of the technology, however only 18% avail themselves of the technology on a regular basis. (8) In other words, the performance of mobile payment technology has yet to meet its potential. The new technology – much like the Millennial that has been quick to embrace it – has yet to come into its own.
Perceived security also plays an important factor in the adoption of mobile payment technology. While many mobile wallet apps rely on PIN, fingerprints and other biometrics, many consumers are still somewhat reticent to rely on these security features to routinely protect financial information. Mobile delivery also makes up more than its fair share of the $6 billion in fraud costs merchants and card issuers face on an annual basis. While mobile payments account for only 14% of transactions among merchants who accept them, they also account for 21% of payment fraud cases. (9)
Nevertheless, today’s eCommerce market gets increasingly more competitive each year. In order for merchants to stay aggressive in the market, they will need to embrace all new technologies the Millennials have been readily adopting.
However, it is also vital that all consumers feel protected when it comes to adopting and using mobile payment technology. And, fintech companies play a critical part in giving these consumers peace of mind through enhanced security features and fraud management tools. These tools are important to enabling today’s technologies, and also future innovations, so that market demands can be met without increased barriers of risk. Therefore, for mobile payment technology to fully saturate the marketplace, it must be seamlessly merged with both security and convenience.
Despite the hesitance of some generations to readily adopt mobile payments as a way of life today, the technology still holds an enormous amount of promise. Millennials are setting a bar for the next generation by embracing the technology with enthusiasm and treating it like a standard convenience of everyday living. And, the reluctance of their elders to readily embrace this new way to pay nearly guarantees that fraud and security concerns will be swiftly and properly addressed before new generations propel mobile payments further into the mainstream.