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NEW YORK (MainStreet)—The eventual success of digital wallets will depend heavily upon two factors: the ability of digital wallet providers to market their offerings to both wary and unaware consumers, and the cooperation of the various players in developing a standardized and universal operating platform.

In other words, the various mobile wallet capabilities need to find a way to get along.

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Consumer incomprehension of the functionality and benefits offered by digital wallets remains a challenge for marketers.

Jordan McKee, associate analyst with the Yankee Group, cited the disparate digital wallet initiatives as an inhibiting factor to the sector’s growth.

“There’s not much cooperation,” he said. “Everyone’s in it for themselves.”

McKee compared the digital wallet industry’s current landscape to that of the American automobile industry in the 1920s, saying many of today’s digital wallet providers are “struggling to gain traction.” He suggested that “some consolidation needs to take place to spark the adoption and use of digital wallets.”

“They really haven’t figured out what they want to be when they grow up,” McKee concluded. “They need to take time and carve out value propositions for the consumer and the merchant to adopt.”

In February, published its Digital Wallet Roadmap 2013, which contained the results of a pair of surveys designed to measure consumer awareness and understanding of digital wallets. Andrea Jacobs, comScore’s payment practice leader, noted that 47% of participants expressed security concerns. Many had no idea that a digital wallet can be locked and that customer information is not directly shared with the retailer.

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“We learned that people have significant concerns in the area of security,” Jacobs said. “Enhanced security is a concern if a card is lost or stolen.”

ComScore’s Roadmap also found significant numbers of consumers who demonstrated a general lack of understanding of the functionality, compatibility, privacy and locking features digital wallets offer, largely because digital wallet developers have not adequately explained and marketed their products. Jacobs said that these gaps in understanding represent opportunities to gain potential customers.

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“Once the awareness and understanding gap is bridged, consumers will likely accept digital wallets,” Jacobs said. “If gaps are addressed, our survey predicts that 50% of consumers would use a digital wallet.”

An Explosion of Mobile Commerce?

Indeed, a potential surge in mobile and online retailing could be on the horizon as consumers become savvier and the infrastructure support for digital wallet use develops and grows.

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“We are a long, long way from the death of the plastic card, but we don’t have to be far from an explosion of mobile commerce,” said Tim Jones, founder of Mondex, an electronic cash/smart card system developed in the U.K. which became a wholly owned subsidiary of MasterCard International in 2001.

In a video interview posted on, Jones says that in order for digital wallets to gain widespread acceptance, a wide variety of players must join forces for their common benefit. These players, he says, include payment associations (singling out Visa, MasterCard and American Express) merchants, the mobile phone industry and the “leviathans” of the Internet economy, specifically citing Apple, Google and Microsoft.

“Progress has been slow,” Jones said. “All of these corporations have their own agendas but for a payment to work, soup to nuts, they’ve got to learn to work together and that’s why things haven’t been as fast as they could have been.”

Jones added that both consumers and merchants have similar desires when it comes to using a digital wallet as a payment instrument.

“Consumers want to be able to make a payment in any shop, using any of the cards they have, using any handset,” he said. “And that’s of course what retailers want. They just want it to be easy for consumers to make payments. So real effort needs to be made to recognize that if all of those corporations can work together, take a bit of risk they can create a significant wave of economic development.”

Integrating Marketing Efforts

Ed Olebe, group head of MasterPass Services (MasterCard’s entry into the digital wallet arena), agrees with the “general premise” that consumers could be better educated, but notes that the market is saturated with a “vast preponderance of independent schemes.”

“There are a bunch of competing point-to-point schemes, hundreds of them,” Olebe said. “That’s one of the reasons that none of them have scaled much. Consumers are trying to figure out which one to download and merchants are trying to figure out which ones to put on their sites, and how many.”

Olebe sees MasterPass as a product of evolution.

“MasterPass is MasterCard beyond plastic,” he said. “It is how we evolve into digital space, beyond but not necessarily instead of plastic.”

Olebe markets MasterPass as “not a wallet play, but a platform play, an aggregator,” he said. “It connects with multiple other wallet products. This is a better path to scale.”

He relies on brand loyalty, both to the MasterCard name and to whichever mobile phone platform a customer might prefer. “Consumers are best served by interacting with someone they trust ... You pick the device you like and we’ll figure out how to make it work.”

MasterPass will be launched in Canada and Australia in early April, while consumers in the U.S. and U.K. will see it this summer, Olebe said.

Marketing efforts at Visa follow a similar line. Jennifer Schulz, global head of e-commerce says the comScore report validated Visa’s approach in bringing its digital wallet,, to market, emphasizing security, convenience and easy check-out.

“The digital wallet is the new form factor as to how you access your accounts,” Schulz said. “The piece of plastic will evolve but the underlying components of cards will still exist. Credit cards will evolve to a cloud-based or mobile phone platform but the underlying form will remain.” became commercially available in November 2012. Heather Clifton, Visa’s head of marketing for emerging products, said it has enjoyed a positive response, noting that more than 50 financial institutions are participating in the utility.

“At the moment, we’re targeting more online merchants and cyber-stores with the goal of [including] millions of merchants,” she said.

Schulz added that is also open to other similar and competing products, but emphasized loyalty to the Visa brand.

“We’ve allowed other brands to be a part of this wallet,” she said. “For any digital wallet to work it will have to be open to the other brands in the ecosystem.”

“We believe consumers are looking for a strong brand in combination with their financial institutions,” Schulz added. “This underlying trust in brand is the reason why consumers select”

One smaller start-up, Digital Wallet Plus, is taking a different approach. Upen Patel, the company’s founder and CEO, plans to incentivize merchant participation through lower transaction costs and is “looking to leverage the banking industry to use their underlying rail” rather than using the credit and debit card rails.

“This allows me to deliver benefits to the merchant in terms of a significantly lower transaction cost.”

On the consumer side, Patel wants to attract unbanked and under-banked customers. Citing FDIC statistics, he says there are some 120 million such folks in the U.S., 60% of whom have smart phones.

“They are looking for solutions to help them manage their money without the burden of banking fees,” Patel said.

Collective partnership could be the ticket to more wide-spread adoption of these utilities.

“My service will not become a bank but will partner with FDIC-insured community banks,” Patel said.

Also see: Why the Glacial Adoption of the Mobile Wallet