The Future Of Mobile Wallets Lies Beyond Payments

Apple Pay makes up more than $2 out of $3 spent on purchases using contactless payment across the three major US card networks. I agree with my colleague Sucharita Mulpuru that this is likely a big chunk of a small pie, considering the lower maturity of the mobile contactless ecosystem in the US. It's always better to look for absolute value. In this regard, PayPal processed $46 billion in mobile payment volume in 2014, up 68% over 2013.

Should marketers care about mobile wallets? Yes. Mobile wallets are not just about mobile payments. Consumers want a better shopping experience. Offering faster or more-secure payments is not enough; wallet providers will have to solve real pain points, such as giving consumers the ability to see what’s on stored value cards at any moment in time, access loyalty points, or automatically receive digital copies of payment receipts. In particular, 57% of US online adult smartphone users are interested in having access to loyalty program points and rewards within a mobile wallet. Access to loyalty rewards from brands is the most wanted feature from consumers, and it's the one least integrated in mobile wallets today.

In 2015, 27% of marketers and digital business executives plan to start using mobile wallets to engage with their customers. As consumer usage begins to reach critical mass over the next three years, thanks to the integration of added value services beyond payments, Forrester expects mobile wallets to become a new marketing channel. Take the Starbucks app often referred to as a mobile payment success story. It's an integrated app, where payments fade into the background to cede place to a mobile engagement platform. However, it is not a mobile wallet per se since it does not let consumers manage digitized valuables (offers, coupons, loyalty rewards, tickets, boarding passes, gift cards, IDs, electronic receipts, or product information) from multiple brands while enabling payment transactions. In the next three to five years, we expect mobile wallets to take off significantly, becoming a new marketing channel where marketers will mix their offline and online marketing efforts. Instead of replacing merchants’ own integrated apps, mobile wallets will complement them and offer more reach to engage beyond apps and loyal brand aficionados.

How will this work? Consumers spend the majority of their time on just a few mobile apps and, increasingly, on new audience portals like messaging and social media apps. To reach consumers where they are, brands will be required to "borrow" mobile moments from platforms with huge engagement. In the next couple of years, mobile wallets will become one of these platforms. No matter who wins the mobile wallet war, marketers should take advantage of this emerging opportunity to create a borrowed brand presence on their customers’ mobile devices. Many players will develop integrated mobile wallet apps, sitting at the crossroads of online/offline marketing and adding value beyond payments. Marketing leaders must develop the branded content they want their customers to save and manage on mobile wallets. Marketing leaders will benefit from mobile wallets if they tie together loyalty programs, coupons, product discovery, gift cards, and promotions to create powerful and new brand experiences in the mobile moments of their customers.

Clients who want to know more about this opportunity can download the full report here.


Still Need To Cross The Chasm

That's a start. Mobile payments remains a nascent offering, representing significantly less than 1% of retail purchase volume. Google Wallet attracted the innovators. Apple Pay is getting the early adopters. But that isn’t good enough. Mobile payments are still trying to force significant change on customer behavior. In order to get any significant share of the payments market, the mobile providers are going to have to show how the technology makes consumer lives easier. Layering on functionality isn’t the answer, unless it improves the purchase experience. Starbucks so far remains the only provider in the market that is doing this. Many Silicon Valley operators remain fixated on the technology vs the customer. I’m optimistic that Apple will layer on a loyalty program similar to the Kiip offering – offering customers something extraordinary, and hard to copy.