Why Americans aren’t using their phones to make payments in stores

Yes folks, yet another China is beating out the U.S. on mobile payments story based on quotes from Wall Street market analysts. Yahoo Financial reporter Krystal Hu stitches together a few pieces of market info blah with comments from Jordan McKee of 451 Research all framed around last weeks ‘Starbucks app is bigger than Apple Pay’ story :

U.S. Mobile transactions barely accounted for $1 out of every $100 spent in-stores last year…this year, 25.3% of smartphone users in the U.S. are expected to pay for physical purchases by phone, compared with an estimated 77.5% in China.

“Mobile wallets today are basically just your payment card,”

“It (the Starbucks app) does some creative things that go beyond just making a payment…It’s a good model for other wallets to imitate, adding multiple layers to build on the transaction experience.”

Comparing China QR Code mobile payments to the U.S. is pointless, like watermelons to apples. Krystal Hu would have been better off doing some actual research at her local supermarket, like my shopping experience at Harmons today. Harmons has Apple Pay but I was on an errand for my dad. I stuck his EMV chip credit card in the reader, pulled it out and waited.

Me: “Wow, that takes a long time.”
Cashier: “It’s waiting for me to hit the button, but it’s slow.”
Me: “Is Apple Pay any faster?”
Cashier: “Not really, you have to hold the iPhone really close to the terminal and even then it’s slow.”

Bingo. All the Apple Pay terminals I have used in the Salt Lake City region are really slow, not much faster than using a EMV chip credit card. Compare this to the Apple Pay Suica experience:

  • NFC-F response time is 50ms (milliseconds)
  • Average FeliCa transaction time is 200ms with most performance about 100ms because Suica is stored value with local ‘offline’ processing
  • Apple Pay Express Transit eliminates Touch ID/Face ID authentication
  • The antenna ‘hit area’ on American NFC terminals is tiny compared to Japanese terminals

Offline processing is common in Asia and Europe but not America. Most EMV contactless cards operate at 106 kbps (they can go higher but most do not) while Suica always operates at 424 Kbps. Faster payments processing and infrastructure all adds up to one thing: a better customer experience at the cash register or transit gate. Just touch and go.

Apple Pay and Google Pay growth will continue be slow because America does not have a transit platform to drive mobile payments, at least until the American payments infrastructure improves to the point where mobile payments offer an insanely great customer experience over plastic cards.