Retail Rap: Digital Walleting

It has been fascinating to watch the back and forth in recent weeks as competing systems for mobile payment have suddenly been grabbing headlines and jockeying for space in the public consciousness.



The rollout of Apple Pay—the new mobile payment system from the Cupertino digital giant that launched Oct. 20th—appears to have brought what was previously a behind-the-scenes battle into the spotlight. With Google Wallet struggling to make inroads and the retailer-designed CurrentC system yet to be implemented, Apple Pay is off to a fast start—but will it last? Will any of these mobile wallet systems gain traction, or will they remain a novelty for a small subset of consumers?



It will be interesting to see how quickly and enthusiastically mobile payment behaviors are adopted, and which of the major mobile payment systems garners the lion’s share of the market. I have some thoughts on those issues (and what the “arms race” for dominance in the mobile payment space might look like going forward), but before I get into that, I should probably take a moment to review the details about the systems that have already staked a claim in the market.



There are three major players in the mobile payment space: CurrentC—a system backed by a group of retailers called the Merchant Customer Exchange (MCX)— as well as Google Wallet and Apple Pay.



Google Wallet



First rolled out in 2011, Google Wallet utilizes the Android operating system, and makes it possible for users to pay with debit and credit cards, as well as to access loyalty and gift cards on their phone. Like Apple Pay, Google Wallet uses Near Field Communication (NFC) technology, where users can simply hold their mobile phones near the payment terminal to complete the transaction. Google Wallet has never really taken off, perhaps partially because retailers have been pushing back against the systems many restrictions and limitations.



Google Wallet has negotiated fairly high fees to credit card companies, but only about 100,000 stores nationally are equipped to handle Google Wallet today. Most stores still require new point-of-service systems to utilize Google Wallet payments, and many retailers simply don’t have the money to upgrade at this time.



CurrentC



CurrentC is a wallet-free payment system developed by a number of merchants (more than 50 prominent brands across many different retail categories). Prominent names in the MCX include Walmart, Best Buy, GAP, CVS and Rite Aid. Essentially, the system works through an app that links directly to a customer’s bank account—bypassing the credit card companies entirely.



This has some obvious appeal for retailers, and some potential up-side for consumers, as well.CurrentC can be tied into retailer loyalty programs, marketing promotions, etc., and is compatible with many retailers’ existing POS systems, so it will not require a huge capital investment to get up and running. On the flip side, CurrentC has drawn some criticism because of the amount of data it collects on each customer, including driver's license and Social Security numbers, date of birth and more. Still in development, CurrentC is expected to roll out in 2015.



Apple Pay



The power of the Apple brand has already made itself evident in the first week of Apple Pay “going live.” Apple CEO Tim Cook recently announced that one million credit cards had been activated on Apple Pay in the first three days after the system came online.



Apple does have some built-in advantages, including access to the 800 million credit card accounts through iTunes. Unlike CurrentC, which is a retailer-first system that bypasses the credit card companies, Apple Pay is essentially a credit card-based payment system. Agreements with many top banks have contributed to Apple Pay’s early momentum. Like Google Wallet, Apple Pay requires NFC-ready terminals to work, but Apple has already partnered with 22,000 retailers who collectively have 220,000 stores. Big names already on board with Apple Pay include Walgreen’s, McDonald’s, Duane Reade, Nike, Macy’s and Whole Foods.



One of my biggest questions regarding mobile payment systems is not “who will win”, but whether or not there will even be winners and losers. Will the mobile payment landscape continue to be hotly contested, and how will that affect adoption? I see the conflict setting up between Apple Pay and CurrentC to be a possible hindrance to consumer acceptance. When you have those competing channels, that competition will slow adoption.



Mobile payment systems and “digital wallets” are supposed to be about convenience—consumers can leave the wallet at home, and breeze through the checkout process with a wave of the phone or the press of a button. But how convenient will it really be if every store uses a different system, and customers will have to contend with different payment methods? I’m convinced that convenience will be the key differentiator—the channel that can optimize the convenience factor will likely rise to the top.



Another issue that may slow adoption is nervousness among consumers who may worry about the security of their sensitive financial information. That concern was only heightened with the recent announcement that CurrentC pilot program was hacked—and the system is not yet online! While the systems have great potential, I think we need to consider how long it took consumers to become comfortable going from paying largely with cash and checks to credit and debit cards. That process literally took decades. I suspect we are looking at a similar timeline for mobile wallets.



What are your thoughts? I’d love to hear your experiences with Apple Pay or Google Wallet, whether you are looking forward to CurrentC, and what your general thoughts are about how comfortable you will be with utilizing such systems. Do you see a smooth ride to broad consumer adoption, or a rockier road?



You can keep the conversation going by sharing your comments below or sending an email to [email protected].