Buyer Be Ready, Mobile Wallets are on the Rise

There has been significant chatter on the rise of mobile payments and how this emerging technology could potentially disrupt how we buy and sell. However, it may be confusion over the entire mobile pay concept that is the biggest barrier to adoption. While there are a number of business models in the mobile payments world, two product categories are capturing the most attention:

(1)    Mobile Wallets – apps that allow consumers to use their mobile device to pay at the point of sale. Starbucks uses an on-screen barcode to enable payments, while others (Google Wallet, Isis) are opting to go the contactless (NFC) route.

(2)    Mobile Point of Sale – the idea behind mobile POS is to enable merchants of any size (from craft fair exhibitors to in-home service providers) to easily accept credit cards using their mobile phone. The concept is simple: plug a card swipe device into a smartphone, launch the app and start accepting payments.

Google Wallet, PayPal and Isis are the current front-runners in the mobile wallet race, but the market is extremely fluid as new players continue to emerge. In fact, on August 15th, a group of the largest US retailers launched Merchant Customer Exchange (MCX), a mobile wallet offering a “versatile mobile-commerce experience.” MCX founding members include Walmart, Target, 7-Eleven, Lowe’s, Sears and other leading retailers that combine for more than $1 trillion in annual sales.

Square demonstrates market leadership in mobile pay, having applications in both the mobile POS and mobile wallet spaces, with its Square reader for payment acceptance and the Pay with Square wallet app. With over 2 million mobile merchants using the Square reader to accept more than $8 billion in payments a year, the company continues to be at the center of many discussions on where mobile pay will be going. Square recently closed on another round of funding, adding Starbucks to its cadre of high profile partners. The company, now with a $3.25 billion valuation, was started by Twitter founder Jack Dorsey, who hopes to disrupt the payments world much as Twitter did to social media. Square faces strong competition from well-known brands including Intuit and VeriFone, as well as the latest entrant, Groupon Payments.

Not to be left behind, Visa, American Express and MasterCard each have horses in the mobile payments race. Even Apple, which has to date been slow to enabling payments on its devices, has entered the fray by including the Paypass wallet on the latest version of iOS (just launched this month).

Using a mobile wallet at the point of sale alone might not be enough to convince consumers to leave their physical wallets at home. Integration of loyalty and social media features may be the tipping points to higher adoption of mobile wallets. Isis, Google Wallet, from Visa, Serve from American Express and the host of other wallet ventures are in their early stages of development. ORC’s Social Buzz data shows an 80% positive sentiment online over the past year on this subject, particularly among millennials, who are generally quite comfortable using their mobiles to do a wide number of things synchronously. Conversations have also heightened across the pond in the UK, Germany, Italy, India, China, etc.

As we approach the 4th quarter of 2012, the mobile payments market is still struggling to be defined. Mobile POS appears to have caught the attention of millions of mobile merchants, but wallets are not as far along. Next year will bring the maturation of many wallet apps; the leading players will have to work on educating consumers on the benefits of this technology in order for adoption to rise.

Tags: , , , ,

Categories: Financial Services, Retail, Technology

Author:Mark Broderick

Mark Broderick is a Senior Research Analyst at ORC International covering the payments and banking markets.


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