NEW YORK (MainStreet) — You hand the cashier a buck or two, get a little change in return and your Snickers bar is bought and paid for. Easy as that. A majority of consumers (56%) believe that cash is the safest method of payment, according to marketing research firm Walker Sands, and for small purchases that makes sense. But the same report says that 59% of us carry $20 or less – and only 11% have paid for something in cash in the past day.

Of course, that’s where credit and debit cards come in. But with all the hacks lately, who feels safe paying with plastic? Apparently most of us still do. More than one-third (38%) of American consumers said that credit and debit cards are the most-secure payment method. Only a tiny fraction of us (1%) believe using our smartphone is the safest way to checkout. Three times that many say bitcoin is the way to pay. 

What happened to waving our phone in front of a scanner, and not having to deal with dollar bills, useless change, credit card hacks and hypno-crypto currency? Consumers are starting to embrace mobile payments – Apple Pay is driving much of that change – but it’s still mostly in the realm of early-adopters.

“Consumer fears around security and privacy have plagued mobile payment adoption,” says Michelle Evans, senior consumer finance analyst with Euromonitor International, a consumer research company. “The unfamiliarity and complexity of the mobile device creates security and privacy concerns for consumers who want to be confident that their personally identifiable information and financial details are protected."

Consumers worry that sensitive payment information could be captured ‘over the air’ or that fraudsters could obtain personal data, if their phone was lost or stolen.

"That being said, recent consumer surveys have found that the arrival of tokenization and biometric authentication could be shifting that tide and making consumers more comfortable with mobile payments,” Evans said.

Tokenization and biometric authentication are ways in which additional layers of security are added to a mobile transaction, by using something we know (like a password), something we have (such as an additional device; maybe a smartwatch), or something unique to us (perhaps a fingerprint).

“We may never be a cashless society for reasons beyond security concerns, but the use of mobile payment technologies will most likely continue to grow exponentially as time passes,” says John Pironti, president of IP Architects, an information security consulting firm based in Rowley, Mass. “Millennials and future generations will most likely drive this behavior as they most likely don’t view cash as the most secure and convenient method of payment since they already often prefer to use alternative means in its place -- such as credit/debit cards and payment applications.”

Rob Clyde, international vice president of ISACA, a nonprofit association of information security executives, believes that though the move to a cashless society may seem slow, it is gaining momentum.

“Cash has the advantage that there is no chance of loss from fraud or identity theft,” he told MainStreet. “However, it has the disadvantage that it can be more difficult than other payment methods for redress in the event of dissatisfaction with a purchased product or service. Cash also seems a more anonymous form of payment then others, but with video cameras and facial recognition, that anonymity is eroding rapidly."

Despite that fact that cash was selected as the most secure in the Walker Sands study, the study also states that the use of cash is declining quickly, with 59% usually carrying $20 or less in cash, and cash was used about 60% less frequently than the previous year. These stats indicate, Clyde said, that we appear to be marching down the road to a cashless society.

The Walker Sands report also says 40% of consumers used a mobile payment application in the past year, up from 8% in 2013.

“In fact, 2014 marked the first year in which the share of digital payment volume, including electronic and card payments, surpassed that of paper-based payment methods, including cash and checks,” Euromonitor International's Evans added. “This shift toward digital payments is much more pronounced in more developed markets versus emerging ones.”

Evans also believes that it will take more than simply an easy execution of payments to make mobile the preferred way to pay.

“In order to entice consumers to substitute their leather wallet for their mobile phone, mobile wallets will have to provide added value, which could be derived from something like an integrated loyalty platform or the type of personalized consumer experience that today’s shoppers want and expect,” she told MainStreet.

“In my opinion, convenience, benefits, and incentives will tip the scales to greater mobile payment adoption,” said
John Pironti, security and risk advisor at ISACA and president of IP Architects.. “Consumers often gravitate to the easiest and simplest path to success for the activities they would like to complete, even if it means that they may consciously be doing something that they know is possibly less secure."

He cites the password as an example: even though consumers have been provided vast amounts of education concerning the use of good password behaviors, they still often use the simplest and most insecure passwords that are allowed by the environments they are interacting with. 

Once consumers become comfortable with the use of mobile payment solutions and are provided incentives by organizations who support them, Pironti argues, they will most likely begin to adopt their usage.”

Clyde believes that merchants will drive consumer acceptance by practically forcing us to make the switch from money to mobile.

“Further adoption will come from continued innovation around easy-to-use payment apps that are accepted at more points of sale -- think Apple Pay, Google Wallet, Samsung Wallet, banking payment apps, the Starbucks app, and so on,” he says. “Another trend that could tip the scale is point of sale locations that only accept mobile payments, forcing consumers to use a mobile payment system."

For example, some parking lots only accept payment through the use of a mobile app. Also, with mobile payment apps finding their way into wearables like watches, soon consumers may not even reach into a pocket or purse for a smart phone or wallet. However, in a recent ISACA survey, 45% of U.S. respondents indicated that the growth of connected devices has increased their privacy concerns. Plus ça change.


-- Hal M. Bundrick is a Certified Financial Planner and contributor to MainStreet. Follow him on Twitter: @HalMBundrick