Mobile Wallets and the Future of Payments

Mobile Wallets and the Future of Payments

  • On July 24, 2014

Mobile wallets are big news right now. It seems like more apps are released every day. There are big players like MasterCard’s MasterPass and Apple’s Passbook, and there are also store-specific payment apps that allow consumers to shop at specific chain locations. The options are there, and consumers are increasingly taking advantage of mobile payments to slim down their wallets and speed up their checkouts.

According to the Digital Wallet Usage Study (Thrive Analytics), 32% of consumers are now using mobile wallets as part of their payment wheelhouse. That figure is set to rise, especially if EMV systems become more popular.

EMV and Mobile Payments

EMV is a big player in the mobile payments world because EMV systems are designed to support near-field communication (NFC) contactless payments from both EMV smart cards and mobile wallet apps. Internationally, EMV is the standard for payments. However, the U.S. is lagging in uptake; the U.S. payments ecosystem is still dominated largely by magnetic stripe cards, which means EMV-capable point-of-sale systems are not yet as widespread as they could be.

MasterCard, Visa, Discover, and American Express are pushing for merchant EMV compliance by October 2015. Compliance is not mandatory, but merchants will be held liable for card fraud if they do not meet EMV standards. If the push to transition to EMV is successful, we will see a rise in mobile wallet usage because of widespread compatibility.

Karen Webster, CEO of Market Platform Dynamics, suggests that EMV acceptance would accelerate the growth of the mobile payments sector by significant margins. Contact-based EMV payments are inconvenient in a society accustomed to swipe-and-sign payments. It’s very possible that consumers will transition to mobile payments in order to sidestep the hassle and open up a much wider array of services.

The Problems

Although mobile wallet applications appear to be promising, as an emerging technology, they have some growing pains to overcome.

As Ron Herman, CEO of Sionic Mobile, writes, mobile payments are currently divided between many applications. Store-specific wallet applications are to blame for this one; many retailers are taking the marketing opportunity to release chain-specific payment apps that double as customer loyalty trackers. Although combining loyalty tracking with mobile payments is a good idea in theory, the execution is lacking because it divides the consumer between many limited applications. It’s suggested that the mobile wallet experience will continue to falter until these applications are drawn together into a unified consumer experience.

Mobile wallets are also not a catchall payments solution because POS support for mobile payment applications is not yet universal. This is a transitional period on the payments timeline; we’re looking at a payment ecosystem that’s still clinging to magstripe technology, and EMV and mobile payments are edging their way into a system that doesn’t have the infrastructure to fully support them.

What will the future hold for mobile wallets? Hopefully good things; it seems that the mobile payment sector will continue to grow as consumers gravitate toward convenience and speed. That does mean, however, that convenience has to be a priority. The mobile wallet experience needs to be straightforward and unified if consumers are to embrace it as the future staple of their payments wheelhouse.

Interested in EMV solutions for mobile wallet acceptance?

Host Merchant Services offers EMV solutions for business owners. If you’re interested in getting a head start on the rest of the U.S. market, contact an HMS sales representative today and ask about our EMV-compliant equipment and processing options.

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