Citi Scores a Digital-Wallet First for U.S. Banks, But Will Consumers Care?

Citigroup Inc. claims to have become the first global bank to introduce its own branded wallet in the U.S. The question now is how much Citi’s millions of payment card holders will care as digital-wallet services proliferate.

The new Citi Wallet announced Monday is based on MasterCard Inc.’s MasterPass platform, which the network introduced in February 2013. At that time, MasterCard said it was working with 27 financial institutions around the world on MasterPass-based services and that it would be accepted by 5,900 merchants. MasterCard chief executive Ajay Banga last month said MasterPass is now operating in 10 countries with “tens of thousands” of merchants and will be entering four more national markets by year’s end.

Citigroup said that by enrolling in its wallet service, its credit card holders no longer will need to enter their card, billing and shipping information when making online purchases at MasterPass-accepting merchants. To use Citi Wallet, a cardholder shopping online selects the MasterPass button on the checkout page, then selects Citi Wallet and logs in using the same username and password she uses to manage her credit card account online. Then she confirms the shipping address to complete the purchase.

“As online spending continues to grow, we heard from our cardmembers that they want a faster way to make purchases online,” Barry Rodrigues, head of Citi Enterprise Payment Solutions, said in a news release. “Citi Wallet delivers this by reducing online checkout to just a couple clicks—whether they are purchasing a sweater, flowers or a new tablet.” A Citi spokesperson did not respond to Digital Transactions News requests for further comment.

While its new offering apparently gives Citi bragging rights as the first of America’s top-tier banks to come out with a branded digital wallet, the bank also is entering a market that has frustrated many earlier entrants. PayPal Inc., which had $40.4 billion in online volume in the second quarter, is the undisputed U.S. digital-wallet leader, and it also leads in mobile payments. But other wallet providers, including Google Inc. and the telco-backed Isis joint venture, have faced a host of difficulties. The retailer-owned Merchant Customer Exchange (MCX) mobile wallet has yet to launch despite being announced two years ago. Visa Inc. recently revamped its V.me digital wallet as Visa Checkout.

Jordan McKee, a Boston-based senior analyst at 451 Research, formerly Yankee Group, says he gives Citi credit “for being a leader” with its digital wallet, which could help it boost cardholder charge volume and loyalty. But the underlying MasterPass platform, and Visa’s as well, present some obstacles, he says.

“They don’t have a direct relationship with the consumer or even the merchant,” he says. “I think that’s kind of an issue with both of their approaches.”

Citi Wallet’s checkout process also could create some risk of transaction abandonment by requiring the cardholder to look for a MasterPass logo rather than a Citi one to start the payment process. “You’ve got to wonder if that creates some confusion,” McKee says.

McKee also notes that the digital-wallet market is getting increasingly crowded, which in addition to the aforementioned providers features the likes of Amazon.com Inc. and services from scores of tech startups. “I think for merchants and for consumers it’s become incredibly confusing out there,” he says.