Present hurdles in complete adoption of mobile wallets seem bigger.
Guess where’s the next gold rush brewing? Mobile Wallets. Literally everyone seems to be jumping the bandwagon – from technology startups to banks and financial institutions; from large tech players to mobile manufacturers. But is everything that’s glittery in the mobile world truly gold? Are mobile wallets meant to last? Let’s find out.
In 2015, the mobile payment transactions in the US reached approximately $8.7 billion while the number is expected to reach $142 billion by the year 2019.
A mobile wallet is a smartphone app that stores your debit or credit cards and/or loyalty and prepaid cards for the purpose of making payments for goods and services. While mobile wallets have picked up fast in the last couple of years, the idea isn’t quite new. M-Pesa – a payment gateway that began with enabling any phone with SMS capabilities – is one of the earliest experiments that happened in Kenya in 2007 and is still going strong.
Though the Lightspeed Research study mostly focused on the American mobile market, its results can easily be taken as a microcosm of the rest of the mobile world. The study stated that people largely use mobile wallets for food and drink at quick service restaurants (40%); convenience stores (34%); large retail (31%); household bills (29%) and telecom services (27%).
That takes us to how many kinds of mobile wallets are available for making such payments?
There are mainly two kinds of mobile wallets available in the market:
- Single-purpose wallets
- Multi-purpose wallets
Little wonder that the US leads the mobile wallet market since most of the single-purpose wallets come from American companies namely Starbucks, Subway, Walmart and Burger King.
Multi-purpose wallets are where the big three (Apple, Google, Samsung) take the lead followed by PayPal and other players. This means that these wallets are used for any kind of payments regardless of product or brand as long as those products and brands have integrated themselves with these.
One of the backbones of the current mobile wallet ecosystem is the ability of the players to lock the consumers into the system through loyalty programs.
The big three use NFC (near-field communication) technology for enabling the payments. This means that consumers have to tap their phone on NFC-enabled payment terminals, provided both your terminal and phone are NFC ready. This creates a hurdle for smartphones that don’t support NFC. The only solution that’s expected in the future is more and more people adapting to the big three or other smartphones starting to support NFC.
The future solution to this problem is the new chip-and-pin EMV cards that are on the anvil. Since consumers would need new payment terminals in future, they might as well get technology that is mobile-wallet ready.
This hurdle has already been taken care of since we have fingerprint scanners on smartphones available.
Consumers’ banks need to be equally proactive in implementing and embedding mobile wallets into their system. As of now, more and more banks are fast catching up with mobile wallets.
One of the backbones of the current mobile wallet ecosystem is the ability of the players to lock the consumers into the system through loyalty programs. This is also an efficient way to keep the competitors out. The multi-purpose mobile wallets – Apple Pay, Android Pay and Samsung Pay offer loyalty functionality on their platforms while single-purpose wallets or Walmart or Starbucks already come with these.
If loyalty program is married to mobile wallet, it may result in an extremely loyalty-based ecosystem where consumers will be the king.
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