Mobile Payment Scorecard
Apple did not create the mobile payment market when it launched Apple Pay in September 2014.
However, Apple Pay did effectively bring mobile payment to the forefront of retailers’ omnichannel commerce strategies. Consumers are slowly starting to follow, with Deloitte data showing in-store mobile payments have increased from 5% of total in-store payments 2014 to 18% in 2015.
Chain Store Age decided it would be a good time to take a quick look at what is happening with mobile payment providers in three key verticals: platform providers, retailers and financial institutions.
Platform Providers: Three’s Company
Apple Pay remains the preeminent mobile payment service, with Apple claiming it holds a 66% share of the total mobile payment market.
However, two other platform providers are targeting the mobile payment space. Google replaced its former Google Wallet app with Android Pay in September 2015. Although Apple Pay has a commanding early lead in market share, Gartner data indicates 85% of U.S. smartphones ran on Android in the third quarter of 2015, leaving Android Pay a lot of room to catch up.
In addition, Samsung entered the market in late September 2015 with the introduction of Samsung Pay for certain Android-based devices running on its Galaxy platform.
It is rare for any market to have three leaders. Apple Pay has essentially cornered the iOS market, leaving Google and Samsung to fight over the Android portion. Given the size and fractured nature of the Android market, this could be a time when three’s company, rather than a crowd.
Retailers: Big Names Go Solo
While Starbucks has been offering its own mobile payment application for some time, the recent entry of Walmart and likely entry of Target into the mobile payment provider space signals a major disruption.
The new Walmart service, called Walmart Pay, is likely to increase downloads and utilization of the retailer’s mobile app. With 22 million active app users, Walmart Pay has a huge built-in potential consumer base. A nationwide rollout of Walmart Pay is due this year.
By offering their own mobile payment solutions, retailers increase the share of mobile payments they keep. They also have a new avenue for targeted promotions and incentives.
This incurs costs of developing and supporting mobile payment infrastructure, but larger retailers can afford it. In addition, retailers with their own mobile payment offerings can reap “soft” benefits, such as increased app usage and loyalty membership, enhanced brand image, and more customer data to analyze.
However, there are a finite number of apps consumers are willing to download and use, so only large Tier I retailers will achieve the critical mass needed to support their own mobile payment offering.
CurrentC, the mobile payment application from retailer-backed consortium Merchant Commerce Exchange (MCX) that has not moved beyond pilot stage, may be doomed if major retailers launch their own mobile payment services.
Financial Institutions: A Safe Investment?
Major credit card providers such as MasterCard and Visa offer their own mobile payment apps, and numerous banks and financial institutions, including Capital One and J.P. Morgan Chase & Co., do or will as well. These players have the advantage of building in features like real-time transaction notifications and access to balance and transaction history.
However, applications such as Apple Pay already let consumers digitally store and use all their credit and debit cards, lessening the need for a financial institution to provide mobile payment services. Financial institutions can certainly offer mobile payment as a value-add for apps with broader financial management capabilities, but will not likely pose a major challenge to platform providers or large retailers in the mobile payment space.