The Mobile Wallet Landscape

Navigator Edition: Mobile Commerce & Alternative Payments: SPECIAL EDITION
By: Ben Brown

Digital wallets have been around for several years in the form of online payment tools for e-commerce. Smartphones are shaking up this space, though, by driving intense competition to develop and own the next killer app:  the mobile wallet.

There is a lot of debate about what the mobile wallet should do and how it should work. Some think narrowly, categorizing only multi-issuer, multi-service, NFC-based solutions as true mobile wallets. Some think broadly, scoping any mobile payment service – or app with payment capability – as a mobile wallet. In our view, the answer lies between both extremes. A mobile wallet provides secure digital storage for account credentials (and other personal data) for the purpose of enabling open-loop payments from a mobile device.

Much of the discussion from pundits in 2011 looked at mobile wallets in terms of how they worked – how are funds loaded, where is data stored, how credentials are transmitted to the merchant, and so on – but overlooked the most important question:  what is the value proposition of the wallet? In the chart below, we look at select offerings along two dimensions:  the functions the wallet supports and the sales environments in which the wallet works. This perspective highlights a few important themes, in our view.

  • Payments are a core function for mobile wallets, but value-added services create the strongest proposition for consumers and providers. Bundling payments, offers, loyalty, and more in a “one-tap” or “one-click” experience is supremely simple for consumers. Doing so may also let mobile wallet providers earn a piece of the highly lucrative revenues likely to be enabled by mobile marketing.
  • Mobile wallets are likely to act as a catalyst in bringing together today’s different sales channels.These tools will let brick-and-mortar retailers add some magic to the offline shopping experience. At the same time, the technology is likely to act as a bridge for e-commerce schemes to enter the physical world. This creates serious new competitive considerations for merchants, acquirers, and issuers alike.
  • Winning wallets will work for all shopping channels. Maintaining one wallet for e-commerce, another for mobile content, and a third for brick-and-mortar will be less convenient for consumers and will prevent marketers from seeing a comprehensive picture of the consumer’s preferences and behavior. Many offerings seem to be evolving in this direction; services that are built and managed separately by sales channel will face some challenges.
  • Most initial mobile wallet offerings are being developed by payments industry outsiders. Aside from Visa’s and American Express’s proprietary wallet solutions ( and Serve, respectively), most other major players – including payment schemes, issuers, and acquiring processors – are largely taking a secondary role in supporting wallets from Internet brands and mobile networks. Mobile is a big opportunity that incumbents shouldn’t fight, but insiders need to evaluate which wallet offerings are better suited to deepening, rather than disintermediating existing customer relationships.
  • Retailers are a critical partner, and for mobile wallets. Merchants must be willing to make changes to their POS systems and processes to enable wallets’ value-added services. At the same time, many retailers are investing in their own mobile apps that integrate shopping, offers discovery, loyalty account management, and a card vault for “on-us” payments. Co-opting the merchant community will be an important part of building tomorrow’s leading wallet scheme.
  • Banks are likely to face challenges from the rise of new and innovative mobile wallets. Issuers want today’s mobile card management (and mobile banking) tools to evolve into tomorrow’s mobile wallets, but it’s hard to see how these services effectively deliver the value-added services that consumers will demand. And regardless of which solutions win, digital wallets are likely to shake up conventional wisdom about what it means to be “top of wallet” and how to get there. Banks need to seriously consider how to enhance their offerings or develop strategic partnerships with other wallets to ensure their payment products stay relevant.

The Mobile Wallet Landscape in 2012:   Based on Organizational Capabilities of Selected Providers


Notes:   Provider logos reflect current or announced capabilities and are not indicative of the adoption, penetration, or usage of the wallet among merchants or consumers.  Wallet placement considers services offered by the the wallet provider, but not necessarily directly within the wallet.
Source:   Provider websites and press releases, TechCrunch, NFC Times, CNN Money, VentureBeat, GigaOM, and others.

Consumers will have a lot of options in mobile wallets and these options will be offered by innovative companies. Mobile commerce is likely to be a highly competitive space and notable initiatives have emerged around the world.

  • In the United States, Google Wallet earned the distinction in 2011 of being the first mainstream NFC offering to launch. Google Wallet bundles support for payments, offers discovery and redemption, and merchant loyalty accounts in one NFC-enabled package. As Google integrates its various payment services, consumers will be able to use their Wallet account for one-click online payments (via Checkout), mobile content (via Android Market), digital subscriptions (via OnePass), in-app billing, and more. It’s clear that Google is leading the market in delivering an integrated, multi-channel experience. It’s not clear, however, how Google can overcome the distribution challenge posed by mobile networks’ control of the secure element (a necessary component to make mobile wallets work at the POS via NFC).
  • Isis, the mobile commerce joint venture between AT&T Mobility, T-Mobile USA, and Verizon Wireless, announced its intention to launch its first two markets, Austin, Texas and Salt Lake City, Utah in the summer of 2012.  Like Google Wallet, the Isis offering will integrate payments, merchant loyalty, and offer discovery and redemption.  Isis also announced support from six leading global handset OEMs including HTC, LG, Motorola, RIM, Samsung, and Sony Ericsson, indicating the potential for wide scale distribution of NFC devices compatible with the Isis system.  Isis has also formed relationships with the major payment networks and will presumably announce issuers and merchants leading up to the launch.
  • PayPal, for years the largest e-wallet for online payments, reported over $4 billion in mobile payments volume in 2011.  It expects this figure to grow to $7 billion in 2012 (but it’s likely to be even higher, considering PayPal revised its 2011 estimate upwards two or three times last year). In the last year or two, PayPal and its parent eBay have invested aggressively in mobile commerce assets. We count more than a half-dozen relevant transactions from RedLaser (barcode scanning) to Zong (mobile billing) to WHERE (local search) and more. PayPal has laid out an innovative vision of how payments can happen at the future POS – with PayPal payments enabled by plastic cards, NFC, and mobile phone numbers – and a significant number of the top-200 U.S. retailers have signed up to bring that vision to life in 2012. PayPal is just now launching early trials of its technology but we expect they will be a deep well of innovation in the future.
  • In Europe, the Euro 5 – the five largest mobile telecom conglomerates – are aggressively driving forward a number of mobile payment schemes. They are taking NFC national in France after the successful Cityzi trial in Nice. In Germany, plans are in place to extend the mpass system to the physical point of sale. And operators in the United Kingdom are planning to launch an Isis-style coalition once they receive approval from competition regulators. Taken in combination with another half-dozen initiatives across Europe, it is clear that European consumers will soon be rich in mobile commerce options. European initiatives have an opportunity to grab market share today if they move quickly; if they wait too long, they’ll face intense competition from American exports such as Google Wallet, which may land in the UK as soon as this year.
  • In Japan, NTT DoCoMo released its Osaifu-Keitai offering in 2004. NTT, by far the largest mobile network in Japan with 50% market share, developed its own mobile wallet – an approach that might not gain critical mass in less concentrated markets. NTT has since invested billions of dollars in mobile commerce through merchant incentives and equity stakes in the bank, transaction processor, and technology assets necessary to make it all work. As a result, there are about 70 million compatible phones, and about half as many active users of the service, in Japan today. But Japanese telcos, which leveraged NTT’s wallet, expected adoption to come much sooner and the market still faces challenges in driving adoption and usage. We view NTT’s experience as a cautionary tale for the go-it-alone player or anyone who views the mobile wallet as a short-term investment.

Companies across industries see lucrative opportunities in the mobile wallet.  Mobile networks see it as a way to build deep relevance with consumers. Search firms see mobile as the linchpin in bringing together search, social, and local. Payment schemes from Visa to PayPal see it as a way to build new, high-margin marketing businesses. But the opportunities don’t end at owning the wallet. Players across the marketing, loyalty, and payments businesses can and should proactively engage with these initiatives to discover new revenue streams and ways to differentiate themselves in a crowded market.

For more information, please contact Ben Brown, Associate specializing in Mobile Payments and Merchant Acquiring,

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