It seems that every time we turn around, there is more news about digital wallets and their potential impact on payments. Whether you’re a merchant or an application developer, with so many players, and new developments coming at a furious pace, the digital wallet landscape is become confusing indeed. If your organization is like most, you have limited resources, so choosing the right wallet strategy is important. For most, the technology promises to improve customer convenience, conversions, loyalty, revenue and profitability. For readers unfamiliar with digital wallets, hopefully this short article will serve as a helpful primer.
Defining the term digital wallet seems like a good place to start. Definitions vary, but digital wallets are usually viewed as a way of storing or referencing payment credentials on an electronic device, such that the device can be used to make a payment. Most wallets allow you to place credit cards, debit cards or other payment sources into a virtual wallet, and use that wallet to make purchases on-line, in mobile applications (in-app), or in the store depending on the wallet and how and whether merchants support it.
Beyond these basic capabilities, wallet features can vary widely:
- Types of payments supported: in-store, in-app, mobile web, traditional eCommerce
- Technologies used: NFC (tap), MST, QR codes, barcodes
- Payment methods allowed: debit, credit, alternative payment types
- Specialty cards: pre-paid, gift cards, loyalty cards
- Device compatibility: phone, tablet, OS, web browser, other devices
- Vendor or wallet specific value-added features: e-coupons, shopping lists, pay ahead
With so many potential points of comparison, and hundreds of wallets on the market, it can be difficult to compare wallets directly. It's possible to group wallets into some broad categories however, and one way of doing this is to look at the types of organizations providing the wallets and their business motivations. While there are exceptions to any rule, most wallets fall into one of these categories:
- Mobile wallets (from mobile device manufacturers) - Wallets provided by device manufacturers are meant to provide convenience, and bias a consumer to a manufacturer’s phone, tablet or other device as well as the software, service and partner ecosystems that surround them. These types of wallets are generally agnostic as to the underlying method of payment. Examples are Apple Pay, Android Pay and Samsung Pay. Most support in-store payments (using NFC or QR codes) as well as in-app payments. Mobile wallet providers are busily adding support for one-touch payments for participating eCommerce merchants, to simplify the payment process on mobile websites and compete with other wallet providers like PayPal and Amazon Pay traditionally focused in this area. There is some blurring of the lines between the terms mobile wallet and digital wallet, but mobile wallets are usually understood to be wallets provided by a mobile device provider.
- Issuing banks – While most banks will support one or more of the mobile wallets described above, some banks also provide their own wallets for the convenience of their banking customers. These wallets typically provide capabilities that bias users in some fashion toward payment methods and services friendly to the bank – either by restricting the payment cards supported, by providing incentives to use bank-issued credit or debit cards, or by providing access to additional bank services in a convenient, consolidated app. Examples of wallets in this category are Chase Pay and CapitalOne. These wallets can generally be used at selected retail locations, and some (like Chase Pay) provide support for on-line purchases as well.
- Credit card companies – The card brands play a key enabling role for other wallets, but they also offer their own wallets. Not surprisingly, card brands want to make it easier for consumers and merchants to use their payment cards regardless of the issuing bank, so wallets provided by these organizations reflect a bias to their own payment cards while being device, bank, payment processor and retailer agnostic. Examples of wallets in this category are Masterpass, Visa Checkout and AMEX Express Checkout. Credit card companies are working to make it easier for retailers to integrate eCommerce web stores and mobile apps with their respective wallets to help them capture a larger share of commerce. While most of the action is around on-line purchases today, the card brands clearly have their eyes on wallet-enabled in-store payments as well.
- Merchant provided wallets – Large merchants sometimes provide their own wallets. Merchants want to promote loyalty to their own-brand, cross-sell and up-sell products and services, and avoid intermediaries in the payment processing chain that might erode revenue and margin. Wallets provided by merchants are typically agnostic of the device used for payment and are intended to bias consumers toward doing more business with that specific merchant by providing a variety of convenience features and incentives. Examples are wallets like Walmart Pay and the Starbucks app. Another large retailer, Amazon.COM with their Amazon Pay wallet has gone a slightly different direction allowing their wallet technology developed for their own on-line store to be used by other merchants as well, essentially competing with not only other retailers, but with other payment providers also. Other retailers not offering their own wallets are leveraging third party mobile wallets and incorporating these into their own apps and mobile websites.
- Alternative Payment Providers – Some payment providers also provide their own wallets. Providers like PayPal and AliPay are well established in eCommerce payments, and store payment credentials for millions of users. Not surprisingly, they’re aiming to leverage their large base of existing users to gain further market share in mobile web and in-app transactions, and are providing features that compete with banks like peer to peer payments. Some of these providers are seeking to gain a foothold in in-store / card present payments as well. Other alternative payment players like Coinbase provide wallets focused on storing and facilitating payments using digital currencies like bitcoin and ethereum enabling both consumers and merchants and facilitating both consumer to business and peer to peer transfers. Social platform providers (like China's WeChat) are squarely in the game, augmenting their capabilities with wallets for peer-to-peer, on-line and in-store payments, helping solidify their position as a hub for on-line activity.
- Specialty / Independent Providers – In addition to the wallet categories above, there are additional digital wallets types more focused or specialized capabilities. For our purposes we’ve lumped a few different types of wallets together in the interests of brevity. Some wallet providers focus specifically on the challenge of collecting, storing and managing the redemption of gift cards, loyalty cards and coupons. Managing these cards and ensuring that balances are fully spent is a challenge understood by all of us who have received gift cards or other program incentives. Examples are providers like Gyft (acquired by First Data), CardStar and Keyring. Other providers like eWallet take a different approach, focusing less on the challenge of payments, and more on the challenge of organizing credentials of all types (payment cards, web-site / social-media logins, insurance cards, passports) into a secure cloud-based service accessible from multiple devices. Providers in this category address another twenty-first century challenge, familiar to all of us with multiple cards and dozens or even hundreds of login accounts for various websites and on-line services. Other providers like LevelUp focus in important niche areas like quick-serve restaurants allowing consumers to order ahead and skip the line by paying on their phone. The Chinese market is likely the model where the use of digital wallets is widespread. According to Inside Retail Asia, 76.1% of respondents to a survey of smartphone users in China indicate that they have made a purchase from their smartphone.
For years, pundits have been claiming that “this will be the year of the digital wallet”. Despite a fragmented market, and relatively slow market adoption (at least in North America) the growth trajectory appears clear. Major technology providers and retailers now have well-articulated strategies, and are moving quickly to roll out the technology and promote it. While McKinsey estimates put mobile payments at less than two percent of consumer spending in the US in 2015, their analysis suggests that this will grow to 9% by 2020 (a 350% increase) with the majority of these payments involving stored credentials. Importantly, some industries will see much higher penetration for mobile payments and wallets.
As competition heats up, and consumers demand convenient payment options, especially from mobile devices, the use of digital wallets is expected to grow dramatically. If you’re not already thinking about how to serve your customer with more convenient payment options, chances are good that your competitor is.
For Vantiv customers and partners interested in embracing digital wallets as part of their payment acceptance strategy, 2017 is shaping up to be an exciting year. Vantiv is busily rolling out additional technical resources for developers of wallet-enabled payment applications across Vantiv’s payment platforms. Join the Vantiv O.N.E. community, and follow our Mobile & Digital Wallets sub-community to stay abreast of new developments.
Do you have thoughts on mobile wallets? I’d welcome your thoughts and perspectives!
The table below provides a brief summary and comparison of some of the mobile and digital wallets mentioned in this article as well as links to more on-line resources.
|Wallet||Type||In-store||eComm / In-app||Credit / Debit||Loyalty / Gift||Peer-to-peer||Devices|
|Apple Pay||Mobile wallet||Yes (NFC)||Yes||Both||Yes||No||Apple|
|Android Pay||Mobile wallet||Yes (NFC)||Yes - In-app, mobile web announced||Both||Yes||Google wallet||Android|
|Samsung Pay||Mobile wallet||Yes (NFC,MST)||Yes - In-app, mobile web announced||Both||Yes||No||Galaxy, Gear S3|
|PayPal||Payment provider||select POS solutions||Yes||Both||Yes||Yes||Apple, Android, Web|
|MasterPass||Credit card||announced (HCE)||Yes||Both||Yes||Mastercard Send||Apple, Android, Web|
|Visa Checkout||Credit card||No||Yes||Both||No||Visa direct||Apple, Android, Web|
|Walmart Pay||Merchant||Yes (QR code)||No||Both||Walmart only||No||Apple, Android|
|Amazon Pay||Merchant / Payment Provider||No||Yes||Both||at Amazon store only||No||Web only|
|LevelUp||Specialty||Yes (QR code)||Yes (in-app)||Both||Merchant branded, whitelabel||No||Apple, Android|
|Gyft||Specialty||Yes (barcode)||Gift cards only||Gift card purchases only||Yes||No||Apple, Android|
|Keyring||Specialty||Yes (barcode, ecoupons)||Coupons + loyalty only||No||Yes||No||Apple, Android|
|Alipay||Payment Provider||Yes (QR code, barcode)||Yes||Both||Both||Yes||Apple, Android, Web|
|WeChat wallet||Payment Provider / Social Platform||es (QR code, barcode)||Yes||Both||Both||Yes||Apple, Android, Web|
|Capital One||Bank||Yes||No||Capital One only||No||Yes||Apple, Android|
|Chase Pay||Bank||Yes (QR code)||Yes||Chase only||Chase offers||Yes||Apple, Android|
|Coinbase||Speciality||No||Yes||Bitcoin only||No||Yes||Apple, Android, Web|
|eWallet||Speciality||No||No||Storage only||Storage only||No||Apple, Android, Web, Windows, Mac OS X|
|Amex Express Checkout||Credit card||Limited||Yes||Amex only||No||No||Apple, Android, Web|