By now you’ve heard about the mobile wallet.
Unless you live in a tree on a little tiny island that doesn’t have internet access. In which case, you won’t be reading this either, so I’d say the addressable market is on target…
As 2016 gets off to a great start by most metrics in mobile wallet land, what’s the current status of the mobile wallet, who’s actually using them, and what merchants are accepting them? I’ve done a bit of research to try and nail down some hard figures (which is not easy, since almost no one wants to kiss and tell) for you.
Before I do, I want to clear up a common mistake.
[Tweet “Mobile wallets are about way more than mobile payments. “]
While it does require a mobile wallet in most cases to make a mobile payment, mobile wallets are able to store things like loyalty cards, membership cards, gift card balances, and location or proximity specific marketing campaigns — all of which have nothing to do with whether or not someone is using their mobile wallet to make a payment at a retailer or inside an app.
Here’s my list of relevant mobile wallets, with a quick summary of each:
- Google Wallet – the first mobile wallet to be released, back in 2011, this isn’t a mobile payment method any more. That duty has been transferred to Android Pay. Instead, the Google Wallet mobile wallet is now a P2P (peer to peer) money transfer service, like Paypal.
- Android Pay – the replacement for the original Google Wallet, this is now the gatekeeper between you and a merchant who wants your money. This one also features in-app payments, so if you want to pay for your Lyft ride, well, go ahead.
- Apple Wallet – not to be outdone, Apple changed the name of their Passbook product to Apple Wallet. While Apple was the second kid on the block behind Google (Passbook launched in 2013), their mobile wallet offering has always been a bit more sophisticated and for developers or users, it has remained steady to the original purpose – storing things like loyalty cards, gift card balances, and coupons. When Apple Pay (see the next entry) was added to the mix, the ability to store credit cards for payments was added to the Passbook and then the name was changed.
- Apple Pay – Apple Pay launched with the iPhone 6 and 6Plus, as a method of NFC payment via the Apple Wallet. Store credit cards in the mobile wallet, tap to pay at hundreds of thousands of locations that accept it for transactions. After a huge initial marketing push, adoption and use have leveled off a bit, but the complaint that it doesn’t solve a problem isn’t going to be relevant for much longer – the iPhone touch screen didn’t solve a problem either, Blackberry had a fabulous physical keyboard, but we see where the two companies sit now with their revenue and user base.
- Starbucks – not exactly the traditional use-anywhere mobile wallet (right now), but still a major player in the mobile payments field. In it’s Q4 2015 earnings report, the coffee megahouse reported that 21% of sales are processed with the mobile app. That is HUGE, no matter what amount of caffeine you like.
- Samsung Pay – a little late to the party, but still has the potential to be a semi-major mobile wallet player, IF Samsung can get earnings and sales under control before they are forced out of the #2 spot in mobile phone hardware and have to focus on something other than what they’re currently doing. Released in South Korea and the US initially, they’re expected to announce some EU expansion, along with China; possibly as early as next week at the Mobile World Congress taking place in Spain.
- Paypal Wallet – not really what you’d think of as a mobile wallet producer, but Paypal is one of the original money movers online. Starting as a P2P service (and currently being emulated by Google Wallet and reportedly Apple Pay) back in the late 90s, nearly everyone has a Paypal account (unless they live in a country that doesn’t qualify for service). Getting people to start using those accounts again (for anything besides small merchants accepting credit card payments) is another story. The mobile wallet is basic, gets the job done and retailers like Home Depot have long offered it as a payment option.
So these are the ones to keep an eye on currently. Maybe you’re already using one, or more, of these products. If not, it’s likely time to think about it –
[Tweet “security is generally better than the average swipe (or EMV insertion) when it comes to protecting your credit card number”]
since none of the services above actually use your credit card number to process a transaction – they utilize a tokenization method instead, that issues a single use generated number in place of your real credit card number – so thieves and crooks never get the first glance at your personal data.
What’s the benefit to using a mobile wallet?
In a nutshell, convenience – along with the security I mentioned above. Forget taking your wallet with you, just take your phone, something you most likely would return home to retrieve if you forgot to bring it along.
Loyalty cards, gym membership cards, gift card balances – all of these things can be stored in a good mobile wallet, and used exactly like you would the paper or plastic version – provided the issuer can scan a barcode from a phone, as if it were plastic or paper.
Mobile wallet cards may also contain the ability to offer you special discounts, based on your location, proximity to a beacon, or time of day – something you won’t be able to get with traditional cards. Many retailers and other service oriented businesses such as car dealer service shops are already offering this to users, and savings can be substantial.
So who is using the mobile wallet right now?
As you probably would expect, the largest demographic using mobile wallet technology is the millennials and other younger, more mobile-savvy types. BUT… adoption is growing at a decent pace – depending on what articles you read (or believe, depending on the proclivities of the writer); the big thing to keep in mind is that the entire population is not going to simply toss their LV wallets in the trash and start toting their phone around to pay for everything overnight.
That’s an unrealistic idea, and the likely path of adoption will follow the curve the iPhone (and it’s competitors) and Android devices followed – slightly slower in the beginning, followed by a massive segment of mid-term adopters, and then the stragglers. I’m referring to US and other first world users with this reference – in unbanked, underbanked, technology scarce countries in the developing areas, along with Asia, the mobile wallet is already a ubiquitous part of daily life, since it’s the easiest method of payments and money transfers for nearly any transaction.
Last but not least: EMV cards in the US are likely to drive the mobile wallet user adoption rate at a faster pace than if the switch from magnetic stripe/swipe cards to EMV/signature (useless, but that’s another story entirely) were a painless one, instead of the time consuming, confusing and poorly implemented mess it’s turned into in the first full quarter of extremely limited usage.
In the end, with the majority of merchants poised to switch or upgrade their card terminals, every major manufacturer – Vodafone, Ingenico, etc are adding NFC/contactless payment options into all their new terminals, so merchants won’t need additional hardware to process those payments. Visa also has disclosed a nearly 10% ownership in the mobile merchant processing company called Square, and First Data, one of the largest merchant processors, owns Clover, in conjunction with Bank of America.
So it is going to happen. Unless phones are replaced by some other device in the next five years, payments via mobile phone are going to become a major part of the transactions ecosphere. If you own or manage a business that accepts payments, it behooves you to start looking into the technology now, so you can support your customer base with a minimum of fuss.
And, of course, if you’re a consumer, start looking at the various mobile wallets available now. They all won’t make the cut, but you’ll see more savings and special offers made available to you via the mobile device than other methods in the upcoming months.