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Universal mobile wallets have yet to gain the hearty embrace of merchants and consumers, unlike those serving a solitary merchant. But that will change, forecasts the “Merchant Mobile Wallets: Mobile Payments in Action” report released Wednesday by Mercator Advisory Group Inc.
The report from the Maynard, Mass.-based payments consultancy predicts that by 2021, near-field communication (NFC)-based mobile-payment systems will accept in excess of $200 billion in U.S. retail sales, according to Joe Walent, senior analyst with Mercator’s emerging technology advisory service.
A few factors have been weighing down NFC mobile payments, he says. One is ensuring enough NFC-capable phones are in consumer hands. He estimates that about 80% of U.S. mobile subscribers have a smart phone now, with many of the latest models supporting NFC or magnetic secure transmission (MST), which is a Samsung-only technology. Less expensive new models will help fill the remaining gap. “Things like the release of the iPhone SE will facilitate that,” Walent tells Digital Transactions News. Apple Inc. released the iPhone SE in March, making it the most affordable iPhone currently for sale. It is Apple Pay-capable.
How often consumers buy new devices also is a factor, he says. Many wireless carriers have moved away from offering subsidized phones in favor of either having the consumer buy the smart phone outright or finance it over a period of months.
Mobile wallets serving just one retailer have fared well, Walent says, citing Starbucks Corp as the prime example. “We’re seeing more traction with the single-wallet merchant,” he says. One reason is that the wallet is tightly integrated into the merchant’s business model. “Starbucks is showing everybody their way is how you do it,” says Walent.
Starbucks also benefits from having a quick-serve business model, where consumers expect a speedy checkout and are willing to change their behavior to have the experience.
Others, like the app from gasoline retailer Cumberland Farms, have put incentives to work. Cumberland’s SmartPay enables consumers to enroll a bank account as the funding source. The app automatically deducts 10 cents per gallon. Incentives provide a reason for consumers to change their learned behavior, he says. Mobile wallets like Apple Pay, Samsung Pay, and Android Pay could learn from that, he adds.
“The lesson learned is you need to incentivize the consumer to try it out and see just how effective, if not more effective, it is as a payment or budgeting tool,” Walent says.
