When Google Wallet launched last September MasterCard was named a key partner. This summer MasterCard will launch a partnership with wireless carrier mobile wallet player, Isis, in select markets (Salt Lake City and Austin). Clearly, though, MasterCard is prioritizing mobile wallet solution capabilities because now the credit card giant is launching its own mobile wallet solution – PayPass Mobile Wallet.
The announcement, made just before day 1 at CTIA 2012 in New Orleans, is really no big surprise. MasterCard, like other major payment networks, including Visa, is vying to maintain strong positioning in the growing and increasingly contested mobile payment and wallet space. MasterCard’s PayPass Wallet services announcement is a multi-pronged approach, and centers on three elements:
1) PayPass Acceptance Network, including PayPass Online and PayPass Contactless, which looks to help merchants drive a consistent payments experience in mobile (NFC) and online and across devices (computer, tablet and smartphone).
2) PayPass Wallet, a white label digital wallet capability targeted at banks, merchants, and other partners, and is open to other payment methods (beyond MasterCard).
3) PayPass API, which allows partners to connect their own digital wallets into the PayPass Acceptance Network.
While it’s still early, as most consumers do not yet understand the benefits of NFC-based payments, an increasing proportion of smartphone users are engaged in using their smartphones to move money, buy products and services on their phone, comparison shop, redeem coupons, and start to pay for things – mostly micro-transactions or payments, such as a cup of coffee (think Starbucks app) to movie tickets – using the phone itself. In fact, SmartMeter data from NPD’s Connected Intelligence shows Android smartphone users engaged in mobile payment applications are on the rise, growing 8 percent since August and topping one-third of users by March.
With all that seemingly untapped demand, the challenges for MasterCard and others focused on NFC-based mobile payment and wallet plays are still the same – extending service capabilities more ubiquitously, including more wireless carriers, more NFC-equipped Android smartphones, more merchants accepting mobile payment and digital wallet solutions, and more payment methods (with associated hardware/infrastructure at point of sale).
In the meantime, other non-NFC-based solutions, such as PayPal, may have some running room, but still face some of the same issues to achieving a measure of success – including smart services integration, as well as scaling its solution with large, nationwide merchants, as well as consumer acceptance.
While it still remains to be seen how many of these mobile wallet solutions will make the cut and survive, the market needs to focus on regular, mass market consumer use cases – including lower-value (micro-) payments, such as mobile ticketing (where speed in the payment process delivers real consumer value), and from there moving up to higher-value transactions. Ultimately, the success of mobile payment and wallet initiatives rests on changing entrenched consumer behaviors, and shifting the reliance on, and use of, physical wallets and all of its contents to a mobile/digital version. In order to do this, and facilitate on-the-go consumer transactions and commerce, the ecosystem needs to make sure the process is convenient, simple, and secure for consumers.