2014 feels like a significant year for the mobile wallet.
Perhaps before long we'll all be more comfortable 'buying with Google' on mobile websites and apps.
The payment industry itself seems to be shaping up for a leap forward, with its leading conference opting for a rebrand. After 15 years as the Mobile Financial Services & NFC Summit the event has been renamed as the Mobile Wallet & Retail Innovation event in 2014.
This change reflects the slow clarification of what has been a bit of a curate’s egg until now. Confusion around NFC and smartphone hardware, as well as just what it is that the consumer wants, has distracted from exciting potential of the mobile wallet as a tool to buy on mobile websites.
In 2013, merchant-specific payment apps were arguably more successful than broader mobile payment solutions. The Starbucks app is regularly cited as one of the biggest successes thus far, used for 10% of all transactions and providing the customer with an experience enhanced by rewards. The point being, the customer wants more than just quicker payment.
Across merchants, the major mobile wallet solutions, Google Wallet and PayPal, were joined more recently by many mobile-only payment start-ups (e.g. Droplet, Dwolla, Zipmark) in this burgeoning sector. Will consumers go with their bank’s solution, will Google get first mover advantage, or is it still up for grabs for all those start-up payment apps out there?
Let’s take a look at the mobile wallet trend...
What are mobile wallets?
Mobile wallets are the smartphone versions of older online wallets like PayPal. Storing your credit card details, shipping details, etc., on the mobile wallet allows a user to speed through a mobile website or app checkout that’s enabled for your wallet.
Mobile wallets often allow consolidation of merchant specific cards and apps, as loyalty programmes, for example, can be joined within a mobile wallet. Many mobile wallets also enable select handsets to tap contactless payment points in-store and pay for goods.
Broadly, this leaves three categories of online wallet. Those like Amazon Checkout are online only, not a mobile app and not a physical in-store solution.
Some, like Square, Isis and many merchant apps are proximity only, so used only in-store for payment and reward, not online.
Others are omnichannel, such as Google Wallet, with web, mobile, and in-store facets to their service.
Who are the big players?
Launched in 2011, the wallet allows users to ‘pay with Google’ on mobile websites that have enabled this functionality, as well as paying in-store using a Google Wallet Card, or tapping with an enabled handset. Google Wallet also allows money transfer to other wallets and to join loyalty programmes from merchants you use.
Google Play users already have Google Wallets set up as part of buying media from the entertainment hub. This means user adoption gets a great head start, on top of the millions of users that already have a Google account through Gmail, Google Plus, etc.
MasterPass focuses on checkout online, including a smartphone solution, as obviously MasterCard already has a large stake in physical payment, with its credit cards. An extensive list of merchant partners can be viewed here with stores such as J.Crew, Rakuten and Burger King Delivers already signed up.
Still trusted often over even banks themselves when it comes to paying for stuff online, PayPal has therefore made an easy transition to smartphones. Last year PayPal added deals, much like Google’s loyalty programmes, to keep pace with competitors.
When will Amazon join the party? The behemoth has Amazon Checkout, which is an online wallet, accessible from most devices, but it doesn’t have a mobile optimised solution.
In December last year it was reported Amazon had purchased Gopago, a mobile app to prepay for items ahead of store pickup.
Amazon could be massive in mobile payment, given its expertise and customer base.
2014 will see assimilation
With many smaller companies providing payment apps or physical solutions, 2014 may see a series of acquisitions as the market thins out a little and starts to heat up.
Why will mobile wallets take off in 2014?
Aside from convenience, the main motivation for the consumer is consolidation of loyalty programmes. Rather than storing loyalty cards in your physical wallet, you can join a loyalty programme on your mobile wallet app. See the Google Wallet screenshot for an example.
Incorporating more than just payment has always been imperative and is where many NFC trials have fallen down. Trying to get people used to tapping a phone to pay needs something more than a measly one-off voucher, as contactless credit cards and cash already give the customer what they need in terms of convenience.
However the use of mobile wallets is on the increase, mainly on mobile websites and apps, then more slowly through Google Wallet Cards or through tapping to pay.
Consumers don’t want dozens of merchant apps on their smartphones. This is thought of as one of the drawbacks of apps, full stop. Mobile Wallets can be a general purpose solutions for payment and loyalty.
A word of caution though, this great article from Payments Views points out that the general purpose solutions is often not successful, citing Microsoft Passport, an attempted at a consolidated log-in across websites, as a failed attempt (usurped by various social log-ins) to get users on to a single solution.
Will the same failure await mobile wallets? Those in the industry will say that more likely is two or three mobile wallets on each smartphone, just as many people carry more than one credit card.
The challenge of the physical
The greatest challenge, both conceptually and technologically, is sorting out the ‘tap and pay’ model to actually pay for stuff in-store with a mobile wallet.
Consumers are way happier using an enabled credit card to tap, and the tech for tapping smartphones isn’t yet standardised (there are still disagreements around which party – bank, phone, merchant etc., – has the imperative to ensure security).
That’s why I think 2014 will be the year of the mobile wallet, but chiefly as an online solution on your smartphone, perhaps with the embedded ‘Buy with Google’, bored as we all are of the rigmarole of filling in form after form after form.