TSYS finds AI, mobile-powered payments gaining ground

According to a survey of U.S. cardholders conducted by Total System Services Inc., consumer interest in cutting-edge payment methods is on the rise. For the first time in the survey's seven-year history, TSYS asked consumers whether they would use an artificial intelligence (AI)-powered device to make a purchase or payment. Of the 26 percent who own such devices, 60 percent affirmed they would if such an option were available.

The TSYS 2017 U.S. Consumer Payment Study also revealed 51 percent of consumers would prefer to use a mobile wallet rather than a payment card to pay in-store, an 11 percent increase year-over-year. Sixty-eight percent of respondents had either loaded or were likely to load a debit or credit card to a mobile wallet. Within the past year, 27 percent registered cards to accommodate in-app purchases with retailers online.

"We are seeing modest growth in terms of people loading cards, but where we're seeing larger growth is in the number of people that say over the course of the next two years, they plan on making a significant portion of their purchases using their digital wallets instead of their physical wallets," said Gavin Rosenberg, Senior Director of Product Marketing at TSYS, who is part of a collaborative team behind the ongoing research.

Within the survey group that is actively loading payment cards to mobile wallets, the expectation is that over the next two years they will make 50 percent or more of their in-store purchases using a digital wallet. Harnessing this potential will undoubtedly exert pressure on retailers, who in many cases have upgraded to POS systems that are equipped to process both chip-card and contactless payments.

However, merchant awareness of contactless reader capability may not be there yet. "The interesting part is does that merchant even know that they have the ability?" Rosenberg said. "And is it ubiquitous enough that it becomes a commonly accepted payment method? You're not going to leave your physical wallet at home until the ability to use your digital wallet is truly ubiquitous."

Rewards factor in

Americans continue to value loyalty programs when choosing credit cards. This year's TSYS survey confirmed that 75 percent of consumers own a credit card attached to a rewards program, up from 58 percent in 2015. Seventy-eight percent ranked cash rebates as their top rewards feature.

"Rewards, for the entire length of time we've been doing this survey is the number one driver in deciding the card they used most in their wallet," Rosenberg said. "With rewards programs, every time there is a redemption activity that cardholder recognizes the value of their rewards. From a loyalty perspective, you want people to have redemption events more frequently."

But from a technical infrastructure perspective, rewards point redemption as a tender type on diverse POS systems presents challenges. "To help address this, we've developed a product we call real-time rewards, where literally as soon as you make that transaction and you're issued authorization, the merchant can send you a text asking you whether you would like to pay for that purchase using points, and you simply say yes or no," he said.

Programs like this should ease the transition from physical cards to mobile wallets in the future. He added that the goal on the provider side will be to integrate what, in many cases, have been disparate experiences into a single user experience that allows the cardholder to interact with their bank, their specific credit card or debit card, and their rewards program in one seamless omnichannel user experience.

Trust, choice weigh in

With the Equifax data breach still fresh in mind, many consumers expressed concerns over security. Of the different authentication methods for banking or payment apps, TSYS survey respondents were least comfortable with voice recognition, compared with passcode or facial or fingerprint recognition options.

However, TSYS researchers expect that to change. "I'm in my car and I want to do something with my phone; certainly, I think the most easy access would be to just speak at it and have it recognize me," Rosenberg said. "We definitely envision a use case where we see people becoming comfortable with voice authentication quite quickly, in which case I think we will see a very rapid movement toward providers becoming voice enabled for commerce, and then we'll see commerce shift to this next frontier of ease of use."

Until then, providers must continue to offer flexibility and choice to consumers related to authentication and payment methods. "When one technology is introduced, we're not necessarily seeing the demand for another type of technology go away," he noted, adding that people are starting to use all of them and expecting to have the choice of when and where to use each.

To access the complete study, please visit tsys.com/2017usconsumerresearch .

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