Non-banks winning the mobile wallet wars

Non-banks winning the mobile wallet wars

Non-bank competitors are winning the race to provide consumers with easy-to-use mobile wallet and payment applications according to a comparative study conducted by the US-based Carlisle & Gallagher Consulting Group.

CG assessed a representative group of 20 mobile wallets from various industries including: five of the top ten US banks; tech titans such as Apple, Google, and Isis; merchants, including Amazon and Starbucks; and the four top card schemes.

The competing technologies - which tapped distinct paradigms in NFC, QR codes and cloud-based services - were evaluated based on depth of payment capabilities and ease of the overall consumer experience.

Peter Olynick, CG's card & payments practice leader, says: "CG does not believe there is just one technology that will win the mobile wallet race. We believe the long term winning wallets will have the ability to use multiple transaction technologies,"

Each wallet was examined for merchant acceptance, payment options (single vs. multiple cards), transaction range including peer-to-peer (P2P), online, and point of sale (POS) functionality, as well as the speed and simplicity of the checkout experience covering purchase, receipt, and returns. From the consumer perspective, the ease of the initial set-up process, device compatibility, application management and shopping enhancements were considered.

The front-runners selected by CG were LevelUp, PayPal, Square and Starbucks, who were praised for their ease of use, wide acceptability and loyalty enhancements. Competing applications from the nation's biggest banks and each of the four card schemes, American Express, MasterCard, Discover, and Visa, failed to make the cut

"Within the next three to five years, 50% of current smart phone users will utilise their mobile wallet for typical, daily transactions," says Olynick. "Wallets that see the highest level of adoption will be those that create an intuitive experience while mitigating consumer concerns about privacy and identity theft."

Comments: (10)

A Finextra member
A Finextra member 28 January, 2013, 16:541 like 1 like

The winner of the "wallet" will be providers that make the customer and merchant experience the best.  Customers want ease of use, and ubiquity; that their payment option can be accepted everywhere.  That means merchants have to accept it.  Right now we are in the experimental stage, as to what will work. So, do not count the banks out, as there is time for them to still to come up with a winning solution.  Right now I would say that PayPal has the lead (at least in) the US.

Jan-Olof Brunila
Jan-Olof Brunila - Swedbank - Stockholm 29 January, 2013, 07:221 like 1 like

Dear Chris,

You are quite right, it is still early days. Many of the mobile payments launched today are more like solutions looking for a problem to resolve than the other way around. When paying at a merchant F2F outlet, what can be more convenient and secure than to insert my debit card with chip to and key in my pin code? In order to transfer me to mobile payment usage there needs to be additional benefits offered than the secure and convenient payment. Changing the habits of the general public is harder than building a working It solution for mobile phone payments since consumers are mostly intrested in consuming and not in it for the payment experience.

Arjeh Van Oijen
Arjeh Van Oijen - Icon Solutions - Amsterdam 29 January, 2013, 09:08Be the first to give this comment the thumbs up 0 likes

I agree with the previous comments. Mobile payments that only replace physical debit and credit cards will have limited added value for both payer as well as merchant. Replacement of inconvenient cash payments is in my opinion where the short term business case lies (p2p, POS-less shops/restaurants, door delivery, vending machines, parking, etc.). It´s also not a matter of either QR or NFC, but a co-existence of the two, where QR has the potential of short term mass adoption, while NFC will take another 5 years before there is an installed base that is large enough for mass adoption. The risk of a NFC only strategy is that at the time NFC is widely adopted, QR based schemes could already have taken large parts of the market.

On the long term the business case is not in the payment transaction itself, but in the offering of location based and instant discount/voucher campaigns and loyalty schemes accessible through mobile devices.

Aaron McPherson
Aaron McPherson - Independent - Newton 29 January, 2013, 18:251 like 1 like

It's important to look at the methodology when evaluating this study - it was clearly difficult for C&G to find good ways to compare widely different wallet designs, and they did not always find the correct solution, in my view.  For example, one criterion was number of locations, which is why Starbucks, a closed loop wallet, scores so highly.  However, in the e-commerce world, number of locations is meaningless, and the relevant criterion is number of merchants.  This is why, which is online-only at this point, scores so poorly, even though it is supported at more merchants than Starbucks is.  We either need a different criterion, or separate studies.

In short, I think this study is more instructive as a first attempt at comparing wallets than as a basis for declaring winners and losers.  

A Finextra member
A Finextra member 29 January, 2013, 18:53Be the first to give this comment the thumbs up 0 likes

Aaron makes a very good observation.  However, the idea for my comment is not so much eCommerce (which I view as sitting at home or work, etc. at a PC and scanning the internet, and buying something online); but for regular shopping, on the go, but instead of using my physical wallet, using my phone and my virtual wallet.

With that in mind, I believe that ease of use will be very important, as a provider needs to compete with my ability to pull a credit/debit card or cash out of my wallet, and paying. There is no need for signage saying pay by phone, etc. because you know you can pay.  Ease of use and ubiquity=convience. This is blocking and tackling. Entry level, and everyone is still experimenting.

Then comes the experience.  Ultimately the total customer experience will be the winner.  The differentiator. This includes geo-location based offers, and advise, and a lot of other things, such as keeping track of my coupons, points, etc.

But, right now, the industry is still trying to figure out how these things will all work together.  There is no winning forula yet. So, the banks can still have time to get it right.

Aaron McPherson
Aaron McPherson - Independent - Newton 29 January, 2013, 19:35Be the first to give this comment the thumbs up 0 likes


I see that you are thinking of a replacement for your leather wallet for face-to-face commerce, but that's just one form of mobile wallet, and not the one with the greatest market share right now.  iTunes, for example, dwarfs anything in the physical realm.  C&G could have defined mobile wallets as suitable for face-to-face commerce, and thus excluded altogether, but they did not, which led to the problems in criteria and scoring. The question of interest to me is: where are payments migrating, not whether leather wallets are giving way to mobile phone-based wallets anytime soon (they are not).

A Finextra member
A Finextra member 29 January, 2013, 20:00Be the first to give this comment the thumbs up 0 likes

Aaron, not sure I get your reference to iTunes as a mobile wallet.  I thought it was a store. Not a wallet.  I am not referring here to a leather wallet.  I see iTunes as a virtual store, and it offers things to buy and extra services, but is not a "wallet."  Please help me understand.  Thanks.

Aaron McPherson
Aaron McPherson - Independent - Newton 29 January, 2013, 20:44Be the first to give this comment the thumbs up 0 likes


iTunes is a wallet in the sense that it can be used to buy goods and services from a variety of merchants.  The fact that these merchants all traffic in digital goods in the Apple ecosystem is the only difference.  iTunes is not just a store, in that you can make in-app purchases without ever going into the desktop iTunes application; for example, subscribing to a magazine through iNewsstand.  Originally, of course, iTunes was a digital music store, hence the name; however, over the years it has become much more than that.  Which is why last year, before it became clear that the iPhone 5 would not have NFC, many people speculated that Apple would be a leader in the wallet space.  If you look at the amount of money being spent on apps, in-app purchases, and digital content (music, movies, magazines, comics, TV, etc.), it is much greater than anything we see in the physical realm.  And that's not even counting other mobile wallets like Google Play, XBox points, and Facebook credits (remember when Facebook credits were going to take over the world?).

I hope that clarifies my point of view.

A Finextra member
A Finextra member 29 January, 2013, 21:00Be the first to give this comment the thumbs up 0 likes

Interesting point, but I go to Macy's (or virtually to Macy's dot com), am I going to a wallet or a store, by your defination?  Macy's sells things from other merchants, a big variety eco-system from clothes to goods.  I can even use a Macy's card to make my purchases.  Not quite sure I really get it.

Aaron McPherson
Aaron McPherson - Independent - Newton 29 January, 2013, 22:06Be the first to give this comment the thumbs up 0 likes


The main difference between Macy's and iTunes that I can see is that Macy's owns its merchandise, whereas iTunes does not. When you buy a magazine on iNewsstand, Apple doesn't send you a PDF; instead, it notifies the magazine publisher that you have bought an issue, and the publisher unlocks it within the publisher's own app. This led to problems last year when someone figured out how to spoof Apple's authentication server. People were able to use the exploit to send fake certificates to app developers, allowing them to unlock content or in-game currency without paying for it.  This is closer to cloning a credit card than it is to shoplifting clothing, which is why I think iTunes is closer to a payment scheme than it is to a store.