Today’s announced partnership between the West Coast innovators Square and Starbucks represents a significant milestone in the advancement of mobile payment and digital wallets. Here’s why:
New entrant scale. The Pay With Square digital wallet has suddenly catapulted from a respectable new entrant in mobile payments, driving adoption within the long-tail of retail, to soon being present in every Starbucks, and in NYC, that’s just about every other block. Starbucks, the leader of in-store mobile payments, says that 1 million people per week use its mobile payment app to pay in-store. Its existing mobile payment customers will now be Square’s customers, giving Square an immediate boost in the number of locations and consumers it reaches within the market.
Accelerated adoption. As with the Starbucks app, consumers have only to download the Pay With Square wallet and load their funding source in order to use it. But unlike the existing Starbucks app, the Square digital wallet works with other merchants. According to Square, merchant acceptance is very quick and no-to-low cost, and Square promotes its participating merchants to users of the wallet. I think this set of factors will motivate other merchants — both large and small — to use this as an opportunity to trial mobile payments in their stores. Today’s announcement is unclear about whether the initial implementation will have Starbucks embedded in the Pay With Square wallet, but at a minimum, this deal gives Square broader visibility and awareness and the opportunity to earn the confidence of new customers with its digital wallet, which will drive broader adoption overall.
In my coverage as Forrester’s new payments analyst, I'll serve consumer product strategists who accept or facilitate payments as they create, navigate, and capitalize on digital disruption within payments.
We are in the early stages of unprecedented innovation and transformation of the consumer payments industry, and emergence of a digital wallet marketplace is the next act. The definition of a digital wallet continues to evolve as innovations come to market, and the term is sometimes used synonymously with “mobile payment.” However, there are significant differences. Forrester defines a digital wallet as:
A digital service — accessed via the web or a mobile application — that authorizes payment transactions from one or more payment sources and facilitates other commerce-related features, such as offers, coupons, loyalty rewards, electronic receipts, and product information.
As new wallets are introduced into the market, we will see consumers and merchants accelerate their trial and adoption. Yesterday, Google announced a new cloud-based version of their digital wallet that intends to address many of impediments associated with their first version. In my new report out today, titled “Why The Digital Wallet Wars Matter," I frame the emerging digital wallet landscape, provide a profile of early adopters and how to capture their attention, and outline which wallets will ultimately win in the marketplace. Here are the key takeaways: