In a potential threat to PayPal as mobile payments mature, early adopters are extending their use of digital wallets to in-store use and expressing more satisfaction with solutions that support omnichannel payments, according to a new report from 451 Research.

The report, Omni-channel wallets grow in importance as advanced users migrate from online to in-store, found that 77 percent of early adopters plan to use mobile wallets in-store compared with just 46 percent of the general online population. While mainstream users are primarily embracing wallets for mobile Web purchases, they are likely to this behavior to the physical world they become more comfortable with mobile wallets.

“While the general population is still cutting its teeth on mobile Web transactions, the mobile maturity of our Leading Indicator panel has a strong propensity for in-store mobile payment usage,” said Jordan McKee, senior analyst for mobile payments at 451 Research. “This audience is expressing a clear demand for omnichannel capabilities in their mobile wallets.

“They expect it to seamlessly work across the virtual and physical worlds, much in the same way their credit card is able to today,” he said. “This expectation will continue to increase the pressure on PayPal, which despite its incumbency online, has significantly lagged in expanding its offline presence.”

The report is based on two surveys, one of the general adult online population and one of business and technology professionals as well as early adopter consumers, called the Leading Indicator panel.

Habits evolve
The survey of mainstream users finds signs that habits are evolving for some when it comes to mobile payments. For example, those with an annual household income of more than $150,000 exhibit both high frequency of use and an interest in in-store transactions. The survey found that 22 percent of these consumers are making mobile payments at least several times per week and 59 percent plan to make in-store mobile payments over the next 90 days.

These findings should be a wake-up call for issuing banks to recognize that their most high-value customers are warming up to mobile payments quickly, per the report.

“For issuing banks and their partners, focusing near-term efforts – e.g., relevant merchant partnerships, rewards program integrations – on the omnichannel needs of this subset of the population is imperative,” Mr. McKee said. “Providers must now recognize that as mobile continues to bridge traditionally siloed commerce environments, channel-specific payment experiences will no longer cut it.”

Apple Pay vs. PayPal
Another key finding is that early adopters display a stronger interest in Apple Pay over PayPal compared to mainstream users. The survey of mainstream users shows that 65 percent intend to use PayPal when they make a mobile payment over the next 90 days. However, among early adopters, 67 percent plan to use Apple Pay and just 23 percent expect to use PayPal.

PayPal also continues to lead with mainstream users in satisfaction, with 75 percent saying they are very satisfied compared to 61 percent for Apple Pay and 49 percent for Android Pay.

However, once again, early adopters sing a different tune, with 67 percent saying they are very satisfied with Apple Pay versus 57 percent for PayPal.

The different attitudes towards PayPal and Apple Pay can be attributed to the fact that early adopters are using mobile payments in-store more, where Apple Pay is strongest. As mainstream users gravitate more towards in-store payments, this could be a challenge for PayPal, which is strongest on the Web.

“The inevitable extension of mobile payment app usage offline points to a challenging reality for PayPal,” Mr. McKee said.