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How the fragmented world of mobile wallets will sow confusion

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Isis, the long awaited mobile wallet joint venture, finally opened for business last week, the latest in a line of competitors rolling out mobile payment plays. But the increasingly crowded field highlights just how fragmented the mobile payment market has become. And that threatens to confuse consumers and merchants and may slow the adoption of mobile wallets in general.

No wallet has emerged that boasts the ubiquitous acceptance of cash or credit. What we have are some apps that work with some merchants, or other apps that only work on specific phones or in certain cities. That means that adopting a mobile payment solution requires consumers to figure out who supports their mobile wallet. And it forces merchants to place bets on which system they think will win out.

Multiple tools for paying with your phone

Dunkin Donuts, mobile paymentsSome of this is expected. Starbucks (s sbux) and Dunkin Donuts have mobile apps that support their thousands of stores. But most mobile apps are pitching themselves as a much broader tool for payments in a lot of locations.

That includes apps such as  Square Wallet, which works in 200,000 locations; most of them small, though Starbucks is on the way. LevelUp is winning over retailers and small chains and is deployed in more than 6,000 locations, while Dwolla is also signing up merchants for its mobile payment system. Meanwhile, TabbedOut is targeting restaurants and has more than 1,000 locations now. Other services like GoPago and PayDragon let you order ahead and skip lines at select businesses.

Google Wallet (s goog), which is primarily limited to Sprint (s s), US Cellular and Virgin devices, boasts support at 200,000 locations, but only about about 20 national retail chains support Google Wallet’s full experience with offers. Isis will also face similar limitations rolling out in trials in Austin, Texas and Salt Lake City, Utah. Both Google Wallet and Isis rely on NFC technology, which also needs to be present in both the handset and point of sale terminal.

Berg Insight has said that only 8 percent of merchants around the world were equipped with NFC hardware last year. That figure will supposedly grow to 53 percent worldwide and 86 percent in North America by 2017.

So, even if you’ve embraced mobile payments, you’re going to have a hard time figuring out where you can use your wallet. That’s why these apps come with directories and maps to show you where you can use a particular wallet app.

Wanted: payment simplicity

Google WalletBut that’s not how people shop and pay. Most consumers just want to go where they want to go and they don’t want to have to consider if the store takes a certain kind of payment.

I was reminded of this when a friend asked me out of the blue for a recommendation on a mobile wallet. My explanation was so long and my qualifications so numerous that she concluded there was no real rush to adopt anything. Wired’s Christina Bonnington’s take on living walletless for a month shows that while it can be done, it’s awfully complicated to survive on mobile wallet apps and payment services.

This is to be expected on some level. Paying for something with your phone, while a topic of discussion in mobile circles, for years, is still a new concept for the masses. You have to start somewhere. And many of these competitors are now out beating the pavement trying to get merchants on board with their system.

But because so many of these approaches require a merchant to adopt updated hardware and often software integration, it’s not easy for a business to know what to do. And many don’t want to adopt multiple tools and so they’ll just sit on the sidelines, waiting for some winners to emerge.

Getting around the mobile wallet confusion

That’s prompting some players to take different strategies. Big retailers like Walmart (s wmt), Target (s tgt), Sears and others banded together in August to create their own payment system called MCX. MCX spokesman Jeremy Mullman told me the retail partners felt compelled to build their own system in part because fragmentation in the mobile payment market provided little hope of a universal payment system.

“If you have 10 places taking payments on five or six different platform it’s no good for anyone. It just confuses consumers,” Mullman said.


MCX’s hope is to win a lot more retailers to its side when it finally opens for business at some point. It has more than 20 partners including Best Buy (s bby), CVS, 7-Eleven, Gap (s gps), Bed, Bath and Beyond and others. But unless it can become the go-to tool for both large and small businesses, it’s just going to be one more wallet app for people to load up.

PayPal (s ebay) is also trying to get out of the mobile wallet confusion by emphasizing that its system is not built around a mobile wallet, but a digital wallet. That allows it to accept digital payments in store without the need for a specific phone. You can pay with a phone number and PIN or pre-paid card with other tools also coming. And with a new deal with Discover (s dfs), PayPal has the potential to open up its payment system to millions of locations that take Discover. Google is also reportedly preparing a physical payment card for Google Wallet, which will help it gain acceptance in places without NFC.

Apple’s Passbook (s aapl), which can store and produce tickets, coupons, loyalty cards and other data, also holds the promise of solving some of the confusion. If the various wallet apps integrate with Passbook, there’s the potential to have the right app show up on your phone when you enter into a store that accepts that particular wallet app. But so far, the Starbucks app is the only app that enables in-store payments through Passbook.

How many payment tools will consumers tolerate?

Consumers will still need to familiarize themselves with a lot of different options if they want to start conducting mobile payments. But that’s assuming that consumers embrace the value proposition of mobile payments. Many are not convinced there’s a lot of benefit to be gained or time saved by using a phone to pay instead of credit or cash.

That’s why most of these systems are stressing extra services like offers and discounts to impress upon people the value of using a mobile payment tool. But with each wallet also offering their own set of offers for participating locations, it’s difficult to know how to take advantage of all the best deals around.

Eventually, we’ll need some consolidation and partnerships to emerge. But it won’t happen right away because so many big players are convinced they’re the ones that can unlock value in mobile payments. Until we see some of these efforts come together and weaker systems die off, the pick-up of mobile payments will be slow. And we won’t see the replacement of cash or credit cards until consumers can feel confident they can transact anywhere with a reasonable number of wallet apps.

24 Responses to “How the fragmented world of mobile wallets will sow confusion”

  1. ValidSoft

    The ETA briadcasted a very interesting webinar and debate on the Industry challenges as Payments go Mobile.

    You can listen to the replay by following the instructions below: You may use ValidSoft free access code which is “ValidSoft”. Follow the instructions to access the archive for free: go to, and click “Add to Cart.” On the shopping cart page there is a space for “Registration Discount Code.” Enter “ValidSoft” to get the archive for free

  2. You know what else is confusing? How there’s a bunch of different card providers. I mean, the grocery store down the street takes Visa AND MasterCard? I’m overwhelmed…and what’s this American Express thing?

  3. Great article on the fragmentation of digital/mobile wallets. Who’s going to win? I keep telling anyone who will listen it not the anthentication or communication methods, it’s consumer value add features which will determine the winners. Features like digital reciepts which will can be used for returns, payments history/tracking, it’s swipe now determine the method of pay later. Want to win the mobile wallet war? Win the consumer, the merchants will follow.


    Its tantalising to envisage that utopian era ( a decade or two down ?) when the global economies has hashed together resulting in just 3 or 4 equitable world currencies, all earthlings marked with a unique identifier within those zones (sic) and less than 3 digital wallet solutions ultimately prevails which becomes the sole mode of economic transaction.
    Until then, I am personally inclined to agree with the author and few comments here that existing friction points (around ubiquity, anonymity, interoperability, security, ease of use, transaction fees) will keep this ecosystem fragmented and general consumers confused and non-believer. This will however not discourage all those big financial and CSP players, who will continue to roll out their personal interpretation of the market needs, pushing technologies further and a few among them will make good their business case within those niche markets.

  5. Passbook could indeed become the unifying force, but the Passbook ecosystem is already becoming balkanized itself…instead of getting passes directly off the internet (the best-case way to use Passbook) consumers are being forced to download apps for individual stores (the least desirable way to use Passbook).

    Here is a typical comment from Erica Ogg’s Sept 25 article:

    “This whole experience has been a let down. As you stated use the app once & you cannot reconnect to the app locator. While the Walgreens app does pop up near the store it was not an easy process to get it work first time out. Again, why do we have to download a separate app to use it”

    Fortunately with Passbook there is a relatively simple way to get the ship back on course…focus on delivery of passes online and via email.

    Shameless plug: our team just launched a tool designed for this problem called It’s a 100% Passbook-only search tool, run from within Passbook itself (you download a pass keyed to your city, which acts as a search and alert tool that tells you when somebody released a new pass for your city).

  6. very is is called creative disruption. There will be a natural selection, based on consumers ‘choices and just a few solutions will survive.
    Consumer payments industry is being changed, and this has started from PayPal appearance..
    By the way aren’t 650M wallet accounts of Apple, Amazon and PayPal already based on the cloud? Doesn’t this tell you anything??..

  7. Dave Evartt

    Maybe PayPal should bring back their original product that allowed palmPilot users to beam each other cash. It was fantastic!

    I think an NFC based app that lets you enter transaction details and then just touch the other NFC device and the sending phone sends the transaction details wirelessly. Both phones would get a notification when the transaction was completed.

    • Stuart Hollington

      Who would of thought 3 years ago that all of us would be using our smartphone for web browsing? Mobile Wallets in the next 2-3 years will be as common as the camera on your phone.

      • Don’t count on it. As one of the comments said, in Canada the use of *cash* is growing, and as another comment said, why do we need mobile wallets? It sounds like something being promoted for the benefit of the mobile payment providers, and not for the consumer.

  8. NuShrike

    It was hard enough to get a simple Discovercard accepted in most places. It’s already uphill for PayWave/Zip.

    All these alternatives can only poison the system for customers.

  9. Seriously? How hard is it to pull a plastic card out of your pocket and swipe it? Its a heck of a lot easier than trying to link these multiple apps to my bank account, digging for my phone at the checkout, and waiting for it to load to the right screen so I can pay, then fight with the scanner to read my dirty phone screen. Meanwhile, everybody in line that I have been holding up is giving me dirty looks and thinks I’m a douche (which I would be) because I took 4 times longer to pay instead of just reaching in my wallet and paying quickly like a normal person… I think these apps are just dumb… can you tell? :)

  10. hshstick

    I’m waiting for the day when all you need to carry is one small piece of plastic. This plastic would fit in your pocket, have no batteries, no apps to install or upgrade or crash, and would be accepted by every store on the planet. Imagine being at a store and all you had to do was take this small thing out of your pocket touch or sliding it through a inexpensive reader and within seconds later your transaction is done and your bank accounted automatically debited. Life will be amazing when that day comes.

  11. Russel F.

    Good summary. I have several credit cards, payment cards, a cell phone, two Playbooks, an
    IPad, and a small laptop. I’ve discovered this really great payments technology. It’s called “cash”, and I find I am using it all over the place. Everyone takes it, no risk of a declined payment, or any kind of technical failure, and settlement and liquidity concerns don’t exist. You need secure paper, and in Canada now, our high value bills are in fact made of plastic, with holograms, and some clear sections, so photocopying is not possible. So, we even have a high level of security. Plus, using cash preserves privacy and anonimity – useful if you are purchasing a range of products for which you may rightly feel that your government, or your banker, or your local tax collector, need not know about. Sure, we should all follow all those wonderful laws that have been created to protect us, but economic freedom is directly related to economic success, isn’t it? The development of modern digital payment systems worries me, for a whole range of reasons. And no one offers these services for free, do they? I’ve got a Starbucks card for quick coffee purchases. Plus, I get free refills. For all else (even the part-purchase of our new Murano), myself and many.of my friends, are moving back to using cash. The savings in crazy bank fees alone is non-trivial. For big stuff – sure, cheques and drafts – but chipcards and banknotes – plus a few coins – is the best for all else. “Mobile wallets” seem like they might just be another silly gimmick from the old phone company. How long before 2600 publishes details on how to “upload” your mobile wallet? The whole thing might just be silly, no? And this well written story also shows the level of marketplace confusion. A recent Bank of Canada report suggests that use of cash is actually *growing* in Canada, despite all the “cashless” alternatives being offered. Maybe our 13% transaction tax (called the HST), might have something to do with this. My suspicion is that new electronic payment tools will be mainly used for tracking and taxing, as they offer no real benefit for private individuals. Why would anyone use “mobile wallets”? To me, they seem all cost, higher risk, and no benefit, unless you are running some sort of scheme.
    – Rus