This article originally appeared in FIN, the best newsletter about fintech; subscribe here.
At this late date, it’s hard to believe that there are a lot of American consumers who’ve never heard of digital wallets. PayPal began offering digital payments in 1999, nearly a quarter-century ago. Cash App is ten years old, and Apple Pay just a year younger. And to be sure, the percentage of consumers using mobile wallets is on the rise.
Yet the plastic credit card is still the go-to payment for physical purchases for tens of millions of Americans. Indeed, the rise of the contactless plastic credit card may be causing the adoption of mobile wallets to slow somewhat.
A J.D. Power survey released this week found that the percentage of American consumers who didn’t use mobile wallets because they found plastic credit cards easier to handle has actually gone up slightly in recent months, from 47% in the first quarter of 2021 to 49% in the third quarter of 2022:
It’s conceivable that “easier to use” encompasses several different complaints about mobile wallets, and it’s also possible that there is overlap between mobile wallet usage and credit card usage—that is, some percentage of mobile wallet transactions are paid with a credit card. Nonetheless, the total annual value of credit card transactions in the US is more than $4 trillion, and it has never gone down year to year in recent history. The credit card trade publication Nilson Report projects that credit card usage in the United States will continue to grow at an annual rate of 4.7% through 2027.
Changing consumer behavior is one of the biggest challenges in business, particularly in finance. Surveys in the US and Europe routinely find that a huge number of consumers would like to change banks, for example, yet in any given year, only about 4% do. Fintech has always promised to make things faster and simpler, but getting people to switch away from established habits is never either of those.