Mobile Wallets Weighed Down By Lack of Standardization
Consumers in Austin, Texas and Salt Lake City, Utah have started shopping with the latest option in mobile wallets – Isis.
In restaurants around the country diners are paying with TabbedOut.
At Starbucks, customers are charging their Fappuccinos to Google Wallet.
Secure and convenient, mobile wallets allow consumers to tap and pay with their smartphones at the checkout counter, online and offline. With the choice of using credit cards, debit cards, loyalty cards, and even coupons, mobile wallets centralize cashless money management. Too many choices among mobile wallets, however, is creating confusion and slowing adoption.
The market fragmentation has resulted in consumers facing the acceptance of different mobile wallets at merchant checkouts. Consumers wishing to pay for all purchases with a mobile wallet would have to use several types of mobile wallets to experience universal usage. With mobile payment solutions currently limited to certain mobile phone operators, merchants and cities, a shopper still needs to use cash, or debit and credit cards at many checkouts.
Falling far short of seamless cash management, mobile wallet users are required to refer to directories and maps of locations where their mobile wallets are accepted. Despite the shortcomings of mobile wallets for early adopters, when Wired's Christine Bonnington sought to exclusively use mobile wallets for a month, she declared she was “happier and healthier.” Yet armed with both an Android and iPhone and several mobile wallets, she still found herself facing limited restaurant and retail choices.
For merchants required to make an upfront commitment to a technology, choosing among mobile wallets is even more challenging. Isis, TabbedOut and Google Wallet all use different technology. Both Google Wallet and Isis use near field communication (NFC) technology. NFC is a radio standard that provides contactless communication at short ranges and is embedded in the smartphone and point-of-sale (POS) terminal. Only 8 percent of merchants use NFC worldwide, according to Berg Insight, but this number is expected to grow to 53 percent globally and 86 percent in the U.S. by 2017. Isis, however, claims to use improved security technology by embedding a "secure element" in the SIM card. Consumers cite concerns over mobile wallet security as a major impediment to adoption.
TabbedOut, on the other hand, embeds its technology in the backend of POS terminals. Notably, it has integrated with leading POS vendor NCR's Aloha Point-of-Sale system widely used by restaurants. This provides a seamless solution for vendors and eliminates the need for smartphone vendors to embed NCR technology. It also addresses another major challenge for consumers choosing among mobile payment solutions – choosing a smartphone. While most leading smartphone vendors are embracing NCR, Apple chose not to embed NCR technology in the iPhone 5.
Before 594 million consumers will pay for their purchases with mobile wallets, as predicted by ABI Research by 2016, the mobile wallet industry needs to work toward standardization. Standardization will bring the simplicity to mobile purchases consumers desire. For Wired's Bonnington, a lack of standardization meant using an iPhone and TabbedOut at restaurants and an Android phone and Google Wallet at select retailers. With merchants being approached by a variety of mobile wallet vendors with different solutions, many are choosing to forgo the hardware and software upgrades and are taking a wait-and-see approach.
Google Wallet, the leading mobile payment solution, is facing a growing onslaught of competition. TabbedOut is being used by 1,000 locations. Square Wallet can be used in 200,000 locations and is adding Starbucks. LevelUp has signed up 6,000 merchant locations. With the majority adopting NCR technology, mobile wallet vendors are competing on differentiation among services. GoPay and PayDragon have order ahead services.
There is a movement away from tying contactless payments to smartphones. Mobile wallet vendors may be feeling boxed in by mobile operators. Offered through Sprint, Virgin and U.S. Cellular at 200,000 locations, Google Wallet is exploring non-smartphone delivery options. In what appears to be a return to the old money management system of cash and plastic, Google is announcing a plastic card. Unlike Google Wallet's smartphone mobile solution, the card does not require NCR technology. It still offers the convenience of centralizing all of a user's payment options and provides an interim solution to the leading impediment to mobile wallet adoption – a lack of standardization.
Paypal is also becoming smartphone agnostic and adopting phone numbers, PINs and prepaid cards as the payment vehicles. Apple's Passbook plans to offer consumers a place to centralize all mobile payment options, including coupons, loyalty cards and tickets.
Confused by all the options, a dozen or so major retailers are banding together to promote standardization in mobile payment solutions, including Walmart, Target, Sears, Best Buy, 7-Eleven and Gap. The payment system called MCX (Merchant Customer Exchange) will work with any smartphone. Retailers are positioning MCX, which can be tied to online promotions and coupons, to become the universal payment system.
Whether mobile wallet solutions embrace contactless solutions through NCR, POS or another technology yet to emerge, standardization and simplicity are required. (CL) Link