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US mobile payments survey shows cryptos are a 'token' activity

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Investment Banking Essentials: February 21

US mobile payments survey shows cryptos are a 'token' activity

Despite all the buzz about cryptocurrencies, they are still a relatively unpopular way to use mobile payment apps, based on a recent survey commissioned by S&P Global Market Intelligence. Of the respondents that had used a mobile payment app in the 30 days prior to taking the survey, only 6% had used an app to send or receive a cryptocurrency payment. By contrast, nearly half had used a mobile device to pay for something at a retail store at checkout.

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Our survey began with 904 respondents, which included people that did not use mobile payment apps. Based on the full 904, only 3% of respondents had used a crypto payment app. Of the 904, there were 499 who did use mobile payment services, which results in the aforementioned 6% figure.

The good news for cryptocurrency proponents is that mobile payment users do not seem particularly opposed to the idea of crypto payment apps. Only 28% of users said they would not use crypto payments in the future. Indecision seems to be the greater issue, with 35% responding that they were not sure whether they would use these services.

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Another survey question appeared to support the theme of uncertainty around cryptocurrencies. Of the 129 people that said they would not use a crypto payment app, the second most common reason cited was how complicated those apps were. And 18% of those survey takers had not even heard of cryptocurrencies.

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That said, security concerns remained the most significant reason for people not using these types of apps. This is perhaps not surprising given the string of headlines about massive hacks stealing millions of dollars. In late January, for instance, hackers reportedly stole over $500 million in cryptocurrency tokens from Japanese exchange Coincheck.

While there were fewer of them in our survey, the crypto app users tended to be active mobile payment app users, engaging in a wide variety of activities. On average, the crypto app user did four of the six activities we asked about: paying for something at checkout; paying a bill; doing a person-to-person payment; ordering food for pickup; sending or receiving a crypto payment; and "other." The average non-crypto user did only two of those activities. This makes sense, as people using crypto apps are likely ahead of the curve in terms of adopting technology.

Mobile payment companies might want to consider offering more services for these crypto app users, given their high levels of engagement. Square Inc., for one, has taken some steps. It allows users of its Cash App to buy and sell Bitcoin from within the app. It is not a full embrace, however, as Cash App users still cannot pay using cryptocurrencies. Square's move seems more akin to trading app Robinhood Financial LLC, which in February announced that certain customers could buy and sell Bitcoin and Ethereum with its Robinhood Crypto service.

It is difficult to draw clear conclusions about crypto app users, however, in light of how few there were in the survey. Only 31 respondents had used such an app, resulting in a margin of error of plus or minus 18%. We ran several regressions on the data to look for trends, and only one stood out: a gender divide. Crypto apps seem to have an easier time attracting male users, based on our survey results. Even assuming the worst margins of error, crypto apps would still have a bias toward male users, with 53% male for crypto app users versus 49% male for non-crypto-app users (71% minus the 18% margin of error and 44% plus a 5% margin of error).

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That could create an opportunity for crypto app makers, such as Coinbase Inc., if they can successfully win over female customers. Coinbase ranked as the most popular crypto payments app among the 31 respondents in our survey; however, if the margin of error were particularly severe, might have been more popular. Media reports point to the immense popularity of Coinbase as well, with Recode reporting Jan. 22 that Coinbase booked over $1 billion in revenue in 2017. This is impressive for a company that has raised less than $250 million in funding.

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Amid this success, Coinbase has expanded to offer Coinbase Commerce, a service that allows merchants to accept payments in digital currencies. In so doing, it will compete directly with PayPal Holdings Inc., which allows merchants to add PayPal to their websites to accept online payments.

PayPal's Braintree subsidiary actually partnered with Coinbase early on, announcing in 2014 that it would allow developers and merchants to add Bitcoin to their payment options. But based on Braintree's website, they no longer appear to offer this service. In November 2017, CNBC cited a PayPal spokeswoman as saying that the company will consider support for cryptocurrencies if consumer demand increases.

PayPal's approach to cryptocurrencies remains an open question, as news recently surfaced of a patent it filed related to virtual currencies. The technology behind the patent is aimed at speeding up transactions, which is one of the common criticisms of cryptocurrencies. As others have noted, however, the patent was filed in 2016 and only became published this March, which is a long time in the tech world; PayPal might have moved on to other priorities since then.

While the overwhelming majority of our survey takers had not used a crypto payment app, there was not a complete lack of users, and that 6% might grow in the coming years. But as it stands, these apps have a ways to go before reaching broad acceptance. Newly minted bitcoin billionaires tend to dominate the headlines, but getting consumers more comfortable with the concept of virtual currency and how to go about using it seem like the key to crypto payment apps gaining more of a foothold.


The S&P Global Market Intelligence 2018 mobile payments survey was fielded between Feb. 8 and Feb. 14 across a nationwide random sample of 499 U.S. respondents 18 years and older who had used a mobile payment service on a smartphone, tablet or smartwatch in the 30 days prior to taking the survey, and 405 respondents who had not used mobile payment services. Results have a margin of error of +/- 4.5% at the 95% confidence level based on the sample size of 499, and +/- 5.0% based on the sample size of 405. Other findings from the latest survey can be found here, and the results of the 2017 survey can be found here.