Lack of demand hampers mobile wallet adoption at hotels
 
Lack of demand hampers mobile wallet adoption at hotels
08 JUNE 2016 10:50 AM

U.S. hotel guests’ lack of demand for mobile wallets and alternative payment methods have made them less than cost effective for hoteliers.

REPORT FROM THE U.S.—There was a point when mobile wallet adoption was a priority for Best Western Hotels & Resorts.

It seemed like a no brainer, particularly because integrating it into the Best Western smartphone app seemed to streamline the mobile booking process, said Felipe Carreras, director of e-commerce for the company.

“From our standpoint, we want a seamless and frictionless booking experience,” he said. “And we thought mobile wallets would be a great way to do that.”

But none of that matters if guests simply aren’t using it. So after investing time and effort into mobile wallet integration, Carreras said a lack of consumer interest in North America ultimately pushed Best Western officials to drop support from their app.

“We saw that it had low demand and high overhead,” he said. “So we pulled it off our apps, and we’re in a wait and watch mode.”

Looking for the tipping point
Carreras described the landscape for mobile wallets as “fragmented,” saying that companies such as Google, Apple and Samsung have been unable to win over consumers to their particular flavor of the technology. He said this is a large reason mobile wallets are little used by guests. And he said there is a perception problem for the technology.

“There are a lot of players out there, so nobody has really come out with that one killer app to really rally everybody behind it,” he said. “And I think there are lingering security concerns. It seems like there’s a weekly report of (companies) being breached, so people are more and more reluctant to put (payment) information out there.”

Douglas Quinby, VP of research for Phocuswright, said the core of the issue seems to be that mobile wallets don’t seem to solve a problem for U.S. consumers, pushing the rate of adoption down drastically. He said existing payment methods aren’t that much more complicated than near-field communications and proximity-based payment technology.

“It’s really not such an inconvenience to pull a credit card out and swipe it,” he said. “I don’t think there’s a real urgency from a consumer perspective to do much of anything.”

Phocuswright has previously put together research on consumer payment trends, and Quinby said the company is in the midst of updating that research.

He said there’s a marked difference in payment behaviors among the consumers in the U.S., Europe and Asia. Chinese consumers are much more apt to flock to mobile wallets and similar payment methods, because consumers in that country don’t have the existing culture of credit-card use, so mobile wallets offer a much simpler and more convenient alternative to cash payments.

“That is also the case in India and some other markets,” Quinby said. “Mobile (payment) is a much hotter topic in those markets than it is here. And they have services like WeChat that have become ubiquitous and have built lots of these services within the app.” WeChat is a Chinese-based mobile text and voice messaging service.

Quinby said that even in the U.S. it would make more sense to incorporate mobile wallet use into hotel apps to simplify bookings. But Carreras said the cost of having to support so many different versions of the technology “wasn’t immaterial.”

“More than anything, it was the dedication of resources that needed to be allocated,” Carreras said. “Each wallet solution had its own set of requirements. There is no standardized (application programming interface) or data configuration. Everything had to be treated as a one-off, and that brings added complexity.”

But Carreras and Quinby both believe there will be a day when mobile wallet use really takes off in the U.S., even though the transition will likely happen slowly over time.

“I don’t see an event that will make it like flipping a light switch,” Carreras said. “It’s going to be more of a gradual evolution.”

Other payment options
Quinby said different global regions seem to have different payment tendencies and expectations. While the U.S. is largely credit and debit card based, European and Asian consumers are not.

European travelers, in particular, are used to using direct bank payments, and the standards and systems for those payments vary from country to country.

“I think banks (in Europe) have had a bit of a cultural aversion to the idea of credit,” Quinby said. “So consumers in Europe are more comfortable pushing payments from their bank accounts.”

He said U.S. consumers remain interested in credit-card use largely because they provide incentive points for various things.

He said companies are also dabbling in blockchain payment technology, which is the backbone of crypto currencies like Bitcoin. He said this could eventually hold some significant advantages for hoteliers.

“It’s interesting technology that’s still in its very early days,” Quinby said.

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