It’s getting hot in here, the steadily growing and soon to be overcrowded digital payments club, that is. It seems like every other week there is another announcement about a new player entering the “wallet wars”. This is good news, if you love to see change in the payments ecosystem, and agree that competition drives innovation to invoke new products and services that simplify our daily lives. But ask someone what they think a digital wallet is and you will likely receive a couple of different answers. These answers can vary as PayPal, Uber, one of the Pay’s (Apple, Samsung, Android) or even the utopia version of an application that converts all the elements of your physical wallet into the digital world (i.e. payment cards, driver’s license, health cards, loyalty cards, etc.).
There also seems to be a somewhat varying opinion on the success or outcome of digital payments. According to Gallup analysis, only 13% of U.S. adults with a smartphone have a digital wallet on their device, and 76% of those who have a digital wallet have never used it or have almost never used it to make a purchase from a retailer in the past 30 days. This could be because the technology just isn’t top of mind, that we are creatures of habit or simply that the retailers these consumers visit most often have not yet employed the technology. Raddon Financial Group shows statics stating “7 percent of U.S. consumers have conducted an in-store mobile payment – only a 3 percent increase since 2014.” However, this is a much different tone to those who pose a more optimistic outlook. eMarketer expects the use of proximity mobile payments in the US to ramp up aggressively. They anticipate that transaction value will triple in 2016 due to a growing user base, broader merchant acceptance and the greater frequency of consumers using their phones to make point-of-sale payments on medium- and high-priced products. No matter where you stand, with 15 percent of Millennials saying they use mobile payments for retail point-of-sale purchases: it is no surprise they will lead the way in mobile payment adoption. The Pay products, especially Samsung Pay, will likely drive these adoption rates higher in the months and years ahead as more and more generations are raised with this technology as a way of life and as consumers start to gain a consistent user experience from retailer to retailer at the point of sale.
The word war also signifies that at some point there will be a winner and a loser. To claim a winner or to even think that one winner will emerge in this early stage of the game is a waste of time. The fact is there are many different form factors (desktop, tablet, mobile) technology platforms, operating systems, browsers, etc. that will try to compete for usage. And don’t count out the banks (Capitol One and Chase) and retailers (Walmart and Target) that are entering the space as well. HCE and QR codes can help the FI’s bring their brand back to the top of the wallet so to speak, instead of being hidden away in someone else’s app. The merchants could possibly use that same technology to unite and bring the consistent and rewarding experience that consumers have been looking for. So maybe the end game is that consumers will belong to multiple wallets just like the average consumer belongs to over 20+ loyalty programs. Or maybe, like loyalty programs, the next stage in the evolution of wallets will come from those players who can manage the multiple wallets that the consumer will possess.
At the end of the day consumers will ultimately make the decision on what survives and what doesn’t because they are looking for the products and services that simplify their daily life and those that create a frictionless payments experience. However this plays out, one thing is for certain: the technology landscape of mobile wallets will change both web-based and physical payment systems for the long-term. What side will you be on?