Digital wallet apps unfold as phone users, businesses catch on
“That will likely skinny down to some handful.”
Peter Olynick, the card and payments practice leader at consulting firm Carlisle & Gallagher, sees an edge for the wallet that can handle multiple technologies, such as NFC, bar codes and through the Internet, rather than just one.
The winning handful may have to survive battle on several fronts.
Sprint Corp., the Overland Park, Kan.-based wireless phone company, embraced Google Wallet a couple of years ago.
The three other major wireless companies are building their own.
Isis Wallet, to which Verizon, AT&T and T-Mobile have signed on, is running in test markets Austin, Texas, and Salt Lake City, Utah.
Last August, a group of retailers announced plans to build their own digital wallet under the name Merchant Customer Exchange. Its website lists Best Buy, CVS, Gap, Target, Wal-Mart and others. Some of these have partnered with other wallet apps as well.
PayPal, a big name in online payments, has its version of a digital wallet.
Apple’s Passbook is a digital wallet without credit or debit cards. So far it will store and redeem coupons, boarding passes, movie tickets and the like. The only money it takes are gift cards.
The two big credit card companies are in the mobile payments game, Visa has V.me and MasterCard has PayPass.
Starbucks has carved out its own deal. Load the app on your phone, put money in the prepaid account and hit the store. At checkout, the phone app creates a black and white image — like the bar code on a package — on your phone’s screen.
Starbucks’ reader picks it up and collects the money out of your prepaid account. The app allows shoppers to reload the account through a credit or debit card through their phones.
Starbucks reports that 10 percent of its transactions are paid this way, and the company counts millions of users.
Thing is, it only works at Starbucks. Square Wallet also now works at Starbucks.
While Sprint was an early adopter of Google Wallet, it has found acceptance of the digital wallet less than expected.
The lesson, according to Sprint’s Kevin McGinnis, was that mobile payments won’t make inroads in a credit card world without doing more than making payments.
“You’re kind of pushing string uphill,” he said.
The answer is to use that string to pull in customers with freebies, discounts and other benefits to entice and reward their loyalty.
LevelUp promotes its digital wallet app by telling smartphone users they’ll “instantly get a few bucks to spend” the first time they use it at a new place. Going back means more savings.
Loyalty programs like this are old hat in retail. Anyone working on punching that 10th hole on a prize card knows how they work. Square Wallet punches virtual cards with qualifying purchases.
Much more is possible with mobile payments because they open a two-way communication between consumers and merchants that isn’t possible with other forms of payment.
The merchant gains the ability to send real-time targeted ads to individuals, based on where they are at the moment. Digital also means lots of data surrounding the phone owner’s shopping behavior.
Harley Geiger, policy counsel with the Center for Democracy & Technology, said during a panel discussion on privacy that the choice should be left to the consumer.