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Digital Payments are growing, and financial institutions have high expectations for adoption. But with usage rates stalled, is this the right time for community and regional banks to invest, or should other options be considered first?

 

We just finished an analysis of Mobile Wallets and P2P payments. Here’s a few key points, but read the full article for more detail.

 

There is wide belief among financial services executives that mobile wallets and P2P payments will shortly become basic table stakes, similar to mobile banking. According to the 2016 Debit Issuer Study, commissioned by PULSE, almost three quarters of financial institutions expect at least 15% of debit transactions will migrate to mobile in the next 5 years, and nearly half believe the migration will be in excess of 25%. They have invested accordingly: issuer adoption of mobile payments has surged and 65% of debit cards are now eligible to be loaded into mobile wallets, up from 30% in 2014.

 

 

Financial Institutions are similarly enthusiastic about the growth in P2P payments. According to Pulse, 76% of financial institutions either offer, or are in the process of implementing P2P payments, up from 51% in 2015.

 

But despite the enthusiasm, payments using smartphone mobile wallets at the checkout counter are stalled at small numbers and minimal growth after an early surge driven by introduction of new iPhones and Apple Pay. According to Pulse’s study, only 3.9% of debit cards are enrolled in a mobile wallet, and they account for a minuscule 0.19% of debit payments. P2P usage is likewise very small. Our estimates, based on analysis of data from Chase and the Federal Reserve are that P2P represents about 7% of total payments and 3% of value.

 

What’s hindering adoption? It’s not lack of awareness. But with adoption still low, why are financial institutions so optimistic?

 

Is the marketplace changing? Maybe. The long anticipated implementation of chip cards and merchant installation of chip enabled terminals might spur adoption. As for P2P payments, the future is harder to discern.

 

Invest cautiously and pick your spots. While looking to the future, don’t forget basic blocking and tackling – and the payoff from what we know to work today.

 

See the full analysis and our 4 recommendations (with some fancy graphics) in our TheFinancialBrand article.

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