News/ Emerging Media

Study Proclaims Multiple Winners In Mobile-Wallet Race

by David Gardner
Contributing Writer

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Article Highlights:

  • It will take three to five years for the mobile-wallet phenomenon to reach maturity.
  • CMOs they seek partners because different technologies and features are likely to be consolidated on individual smartphones.
  • Consumers are willing to switch services and features to get the mobile wallet app they want.

Scores of mobile-wallet players are off and running in what is likely to be a marathon event, with many applications expected to find places in the nation’s smartphones, according to a new survey of a representative group of industry players.

Carlisle & Gallagher Consulting Group (CG) announced the results Monday of its assessment of players across a broad swath of financial services, tech titans, merchants, and card associations.

“We feel there will be multiple technologies [in a mobile wallet],” said Peter Olynick, CG’s Card & Payments practice leader, in an interview with “Different merchants will use different technologies for different reasons.” He predicts it will take three to five years for the mobile-wallet phenomenon to reach maturity.

What should CMOs do?

For one, Olynick suggested they seek partners because different technologies and features are likely to be consolidated on individual smartphones. And they shouldn’t take existing apps for granted; CG’s poll of consumers found they are willing to switch services and features to get the mobile wallet app they want.

“The new mobile wallet enabled by smartphones is more than just a payment card–it will improve your entire shopping and transaction experience,” Olynick said. “Wallets that have the highest level of adoption will be those that create an intuitive experience while mitigating consumer concerns about privacy and identity theft.”

For a mobile-wallet application to rank high on CG’s survey, it had to pass muster in two main categories: payment capabilities and customer experience.

In payment capabilities, merchant acceptance, payment options, transaction ranges, and online capability were examined. Point-of-sale functionality, speed, and simplicity of checkout experiences were also looked at.

As for customer experience, the wallets were evaluated for ease of setup, compatibility with other devices, and application management. Functionalities for improving overall shopping experience and shopping enhancements were also examined. In all, 20 wallets were studied. Favored transaction technologies were near-field communications (NFC), quick response (QR) barcodes, and cloud transactions.

Olynick said the study identified a sizable shopping-happy group who look like early adopters. “There are people who enjoy going to the mall and spending a couple of hours,” he said. They numbered about 27 percent of the survey’s consumers and tend to use social media to enhance their shopping experience.

Another group of consumers who are included among early adopters were defined as payment optimizers; they were concerned with using their cards effectively to make payments “based on their financial situation, loyalty benefits, and other offers.” Olynick places himself in that category because he wants to make a purchase and move right along.

One specialist in mobile marketing, Michael Becker, is confident mobile wallets will one day be successful, but he believes there will be some tough challenges along the way.

“It’s clearly going to happen,” said Becker, who is managing director of the Mobile Marketing Association’s N.A. branch. “But an end-to-end system will be needed. All the parts will have to come together to create mass-market consumption, and that could take 12 to 24 months at a minimum.” He believes NFC must play an important role, be accepted by both providers and consumers, and be rolled out in a widespread manner.

“Everything from initial consumer contact to purchase to final consumption will be necessary,” Becker added. “If properly implemented, any CMO can profit from it.”

The study turned up evidence of latent resistance to mobile wallets among many consumers CG called “traditionalists,” who aren’t interested in mobile wallets at all. Some of these consumers had security concerns. The numbers of the traditionalists uninterested in mobile wallets, of course, could change in the future as the wallets become easier to use.

The CG study found the usual front-running suspects: LevelUp, PayPal, Square Wallet, and Starbucks. Android and iPhone owners use LevelUp to scan a QR code at terminals in local businesses. The user-friendly app can attach a credit card. It is used at nearly 4,000 retailers. Square Wallet also features an easy setup with credit-card capability, and more than 200,000 businesses accept it, including many Starbucks stores.

Another pacesetter identified by CG was PayPal, which had a high customer-acceptance rate bolstered by its easy setup and ability to provide rewards, downloads, and e-gifts. PayPal, a unit of EBay, already has millions of users for its payment-processing system. Credit and debit cards can be easily attached to PayPal.

There was much of interest to CMOs in the report. CG has cautioned that payment providers should prepare to protect their customer base because mobile wallets can be so desirable–at least for some consumers–that they will abandon longtime providers for a mobile wallet app that will meet their new needs. In earlier research, CG found that banks and financial institutions could be at a loss when competing against players with strong social experience backgrounds, such as Facebook, Google, Apple, and Amazon. On the other hand, financial institutions still operate from a position of power due to their large customer base, and their security tied to credit and debit cards.

The financial institutions evaluated by CG included Bank of America, Chase Bank, Citibank, PNC Bank, and Wells Fargo. Tech titans included Apple Passbook, Google Wallet, ISIS, LevelUp, PayPal, and Square. Merchants examined were Amazon, Dunkin’ Donuts, Starbucks, Target, and Walmart. Card associations in the study were American Express, Discover, MasterCard PayPass, and by Visa.