Payments made through mobile apps like Apple Pay are rising, but at a slower rate than in past years, according to a report by the Electronic Transactions Association.

U.S. consumers spent $64 billion through mobile wallet apps or dedicated apps from a retailer last year, up from $45 billion in 2017, the ETA said. The 42 percent rate of growth in 2018 was down from 51 percent in 2017. The pace is expected to slow to 37 percent in 2019, resulting in $88 billion in consumer spending by such means.

“We as a society have become much more dependent on our mobile devices. It is not just a communications tool,” said Amy Zirkle, the interim CEO of the group. “I answer email off that device. I handle all my travel off that device. So it’s only a natural that it takes on a greater prominence in our daily lives.”

“It’s about enabling you to engage in commerce where you want, when you want and how you want,” Zirkle said. “That’s what we see with mobile payments.”

The group, in “The State of Mobile Payments in 2019” report released June 5, found that about 23 percent of smartphone owners used a mobile wallet app in 2018 and about 11 percent of smartphone owners were active users of such payment methods. The ETA’s board includes representatives of Apple Inc. and Google Inc. 

The growth of mobile wallet users still leaves the market smaller than predicted when Apple Pay launched five years ago.  ETA’s then-CEO Jason Oxman speculated  in a blog post that Apple Pay and similar products could entirely replace plastic credit cards.

The industry still sees potential for growth. Most payment terminals can now take a credit card with a chip and thus also have the capability to accept mobile payments. But retailers have to turn on the mobile-payment function, and it’s thought that some have not. 

Leading phone manufacturers Apple, Google and Samsung Group provide apps that allow people to link smartphones to credit and debit cards. The apps act like a digital wallet and allow consumers to make purchases with their phones at brick-and-mortar stores. PayPal One Touch, PayPal Inc.’s mobile app, also allows users to make in-store purchases through compatible Android phones.

Other apps sponsored by retailers allow shoppers to spend money through phones at specific chains. Starbucks developed a mobile app that allows users to load money on to the phone and spend it at the coffee chain, like a digital gift card. Many retail-specific mobile payment apps link to and track customer rewards.

Security and privacy

As mobile payments become more popular, the focus on the security underlying the technology is expected to rise as well.

The technology of mobile payments at physical locations is known as “near field communication.” It’s the same technology that allows for contactless credit cards, in which chips or magnetic stripes don’t need to be run through a reader, another innovation in electronic payments. Essentially, near field allows for data to transfer between devices without relying on an internet connection, based on the devices’ proximity. That enables shoppers to pay with a tap of their phones at the point of sale.

Information moving between phone and payment terminal is encrypted and tokenized, which means a customer’s card number never gets shared with the retailer. If the retailer’s payment system is hacked or the transaction itself is intercepted, the shopper’s card number will not be compromised.

In some cases, the card number is not saved on the phone at all. That is a big reason supporters of mobile payments tout the transactions’ security.  

Susan Grant, the Consumer Federation of America’s director of consumer protection and privacy, said consumers should consider other dynamics at play.  The federation represents nonprofit consumer advocacy organizations.

“Your mobile device is a computer,” Grant said. Like computers, phones are vulnerable to hacking and malware, not to mention loss and theft. Privacy is also a concern, she said.

Every time consumers pay through mobile apps, they leave a trail of digital “breadcrumbs,” Grant said. Data reveals where a person shops, which stores she patronizes and how much she spends. Some of that information would be available through a credit card statement, but bringing a smartphone into the transaction means more groups are party to and can glean information from the transaction, she said.

Some apps may also access other information on the phone, like contacts, or track information, like location, even when not in use, she said.

Grant said she is heartened by the increased scrutiny of data and privacy. 

“It’s good that people are more aware of how information can be collected,” she said. “If anything, it’s a compelling reason for better legal rights to protect user privacy.”

Grant is not the only one bringing attention to the potential for mining customer data. The ETA also highlighted the ability to pull together consumer data in its recent report.

“All the contextual information — like rewards numbers, coupons, payment history — can be automatically loaded onto the transaction, allowing for a customized, data-driven user experience. Geo-location lets merchants deliver targeted notifications and offers. Transaction history information means better product recommendations,” the report said. “Every isolated action can become a data point, part of a larger, unified picture of the consumer. And it all happens in the background.”

Zirkle emphasized that most of the data collected goes to making sure transactions are more secure and identifying fraudulent spending, though she noted that “the bad guys have access to technology, too.”