Why It Pays To Be Thick In Mobile Payments

Starbucks and Dunkin’ have cracked it. Walmart Pay seems to have all of the ingredients to do it, too. Facebook and Messenger could but haven’t yet. Android Pay has acknowledged that it’s critical to its success and its latest announcements suggest they are working on it. Visa and MasterCard could totally nail it. We don’t know enough about Chase Pay’s plans to be able to say one way or the other.

Amazon and PayPal have also succeeded and in some sense, have a running head start. But MCX didn’t and died because of it. And Apple Pay doesn’t appear to recognize its importance – at least not so far.

What is the “it” that I am talking about?

Creating certainty for the consumer when using mobile payments.

The certainty that comes with creating a thick market of merchants and consumers and accounts that work across any mobile device that they happen to own, and can use at the places they routinely shop.  A thick market is simply where there are lots of willing participants who know they can interact with each other, eliminating the uncertainty about whether they can or should.

But most every mobile wallet scheme that has been launched so far hasn’t eliminated that uncertainty. And, it’s why they continue to struggle to ignite.

Since it’s Monday, I’ll take this a step further.

I don’t think consumers even want a mobile wallet.

Mobile wallets have been pitched as digital containers that can hold the proverbial kitchen sink of payments cards, loyalty and offers. But most of them only work if a consumer has a special kind of phone and is shopping in a particular type of store that enables the technology that powers that wallet.

That, today, is anything but consistent across wallets and merchants and shopping channels – an inconsistency that has created uncertainty and turned the consumer off.

What the consumer wants instead – and has used – is a simplified mobile commerce experience: An account that’s smart enough to keep track of all of their loyalty memberships, coupons, promo codes, and to apply those discounts automatically to their purchase at checkout – without the friction that gets in the way of actually checking out.

In other words, an intelligent method of payment that they know, for sure, will be accepted at the places they like to shop and makes checking out a non-event.

Mobile wallets — at least so far — haven’t done that. They’ve even done quite the opposite.

Most mobile wallet schemes have started in the physical store and failed to consider the importance of creating a thick market of consumers and merchants that would eliminate that uncertainty. The result, therefore, is no real result – a lack of usage which we see that in the mobile wallet adoption numbers for in-store payments. Even when consumers are able to use mobile wallets, they consciously choose not to.

Yet, where consumers have responded favorably is where they are given digital account credentials that are characteristic of thriving thick markets – online and in-store.


People marvel at the success of brick-and-mortar shops like Starbucks and Dunkin’ in their ability to drive and scale mobile payments. They attribute their success to the daily caffeine fix that has gotten people into the habit of using those accounts regularly. That’s certainly part of it.

But the biggest reason for their success is because they have eliminated the friction associated with uncertainty of why a consumer needs a mobile account and where it can be used. Every single user knows that their Starbucks or Dunkin’ app rewards them for usage and can be used to pay for their purchase in every single one of their stores – using any mobile device they own.

Starbucks and Dunkin’ have created a thick market for their mobile payments method – and that has delivered adoption and usage. Starbucks says more than 20 percent of its volume now is via their mobile app, which they also don’t call a wallet. Starbucks and Dunkin’s thick market keeps getting thicker because that thick market and subsequent consumer adoption gives them the ability to layer on other features and functions that keep consumers sticky and drives even more mobile payments usage.

To put it another way, once you make the market thick enough, with participants that know they can interact with each other, it gets thicker and thicker on its own. Thick markets drive positive network effects.


Amazon has created a thick market for digital payments too. It’s called Amazon. Their thick market provides the consumer with certainty on two levels: that they can find a lot of what they want to buy on Amazon, and that when they do, the yellow Amazon button with their registered account credentials means that checkout is a simple click away.

Consumers don’t think of themselves as having a wallet with Amazon, but an account that they use to pay for what they buy when shopping there. Their Amazon account is something that Amazon is banking on becoming the consumer’s commerce identity on and off of Amazon. We’re starting to see the glimmers of this expectation with their recent off-Amazon Moda Operandi deployment. Consumers are invited to set up an account with Moda or “log in” with their Amazon account credentials for the certainty of having a frictionless checkout experience on the site.

At the moment, Amazon’s thick market is predominantly online and within its own ecosystem But it’s a thick market with 300 million users and millions of marketplace sellers, which they are no doubt using to recruit even more merchants both on and offline.

And more merchants beget more consumers who beget more merchants and … OK, you get the idea.

PayPal ignited when it created a thick market inside of eBay because they were the best way to pay for stuff purchased there. That thick market gave PayPal a base of users to use as a calling card to other online merchants interested in eliminating the friction from online checkout – and today the PayPal button is a familiar sight on lots of websites that gives consumers the certainty associated with their checkout experience.

PayPal refers to itself as an “account” accessed online and via any mobile device that comes with lots of features and functions that go beyond checking out with a merchant, including transactional credit, receiving payments, storing funds or even paying bills. PayPal says that its network includes 180 million consumers, more than 50 percent of the top Internet retailers and 14 million overall. More than half of their volume is now driven by mobile.

Over the years, PayPal has offered an array of services to merchants in an effort to make its digital market even thicker by expanding its PayPal user base, including enabling payments inside of consumer markets like Pinterest and Messenger.

But PayPal also seems to understand that the worldwide Web is a pretty ginormous commerce swimming pool with lots of merchants and now lots of competing buy buttons from which to choose. Part of PayPal’s mission of “rewiring commerce” is to continue to bolster its network assets at the same time it enables a single account/checkout experience across all of the channels that consumers shop, including in-store.


That’s Walmart Pay’s play, too.

Walmart Pay has a thick payments market potential because it’s launching inside of the more than 4,000 Walmart stores in the U.S. (600 now live – the rest by year’s end) that host the feet of the 6 in every 10 Americans who visit the store every week. But Walmart Pay’s ignition strategy is to start where it already has a thick market — with its existing Walmart.com user. Walmart Pay is hoping to make its mobile payments market more dense by giving the 22 million accountholders who every month, according to comScore, use any device to pop open the app in the store to check on stuff, more reasons to use it at every Walmart store they visit. Turning those consumers on, literally, to using their existing Walmart.com account in the store to pay is the goal – leveraging an account with a registered method of payment that also stores and applies a user’s Savings Catcher balance and unused gift card balances to purchases made there.

Walmart Pay is hoping to create critical mass inside of its very massive and captive ecosystem that people are already using today – an ecosystem that also has the potential to deliver more Walmart.com users to bolster its sagging eCommerce operation. That also includes serving its very cash-centric consumer who can use Walmart Pay to pay for things purchased online in the physical store.


Going fishing inside of a massive ecosystem with a thick and engaged consumer base is the potential for Facebook and Messenger, too.

Facebook has more than 1.6 billion monthly uniques who spend an hour day on the site and a massive advertising engine that is serving a variety of shoppable ads inside of a user’s newsfeed. Messenger and its 900 million users each month also now have the potential to engage with commerce on Messenger.

What’s lacking, however, is the consumer — and the certainty related to the buying experience.

Some ads push the consumer to the merchant’s Web page and the arduous and friction-filled checkout experience that awaits them there, while others allow a consumer to buy inside the ad, which is also tedious. There’s also the uncertainty of what information will find its way onto the Facebook newsfeed if a purchase is made. Consumers are still not certain whether the details of what’s bought on Facebook will stay off Facebook. And whether what they use on Messenger will also work on Facebook – and vice versa.

That’s not to say that Facebook and Messenger both don’t have a ton of options to pursue to enable that friction-free experience and create that thick mobile payments market. But we haven’t seen it surface yet.

Android Pay’s announcement last week of what we at PYMNTS dubbed its “360° View of Mobile Commerce” acknowledges the lack of certainty that NFC payments has delivered to consumers – a lack of how to use it, why and where to use it. Android Pay is hoping to solve for that by giving consumers a single Android Pay account that they can use across all of the channels they shop, including the mobile Web with a Chrome extension that makes it simple to check out online. Their in-store app also includes an integrated loyalty play to the account registered with the Android Pay app. But to get traction, they will need to go deep before they go too broad.


As networks, Visa and MasterCard have to place a bunch of bets on where thick markets will develop, given the very early days that we are in with mobile payments. As a result, we’re seeing them opening their networks to developers to enable payment using their branded card products, and enabling a wide variety of mobile wallets that are in the market today.

But both networks made the mistake of hitching their mobile payments wagons for too long with an in-store, technology-driven (NFC) solution that constrained both the consumer and merchant side of the market. That thin market yielded little traction while allowing those that started online and device independent to thicken their own digital networks of merchants and consumers.

The story is slightly different in London, however, where the thick market of consumers with contactless plastic cards, and contactless merchant terminals, is driving increased adoption and usage of contactless cards. But it wasn’t until the London transit system enabled all of its modes of transportation to accept contactless payments did the contactless payments market really start to ignite.

The card networks’ real game-changing opportunity is to leverage their brands and their digital checkout marks – and the account credentials that are registered with those accounts – to enable a single digital checkout experience for consumers across all of the channels and merchants they shop. Creating a thick market for mobile payments using network-branded markets means leveraging their access to large pools of consumers via their FI relationships and expanding the number of digital merchants that accept those accounts.


Even though no one, really, has been able to replicate the thick consumer and merchant markets that exist in the physical payments world, each of these players has the makings to create one.

But what we know for sure is that when new mobile payments players go too broad and not deep enough, they flounder.

Apple Pay is perhaps the most visible example of this – a mobile wallet strategy that was lured by the siren song of new technology and bet the farm on the assumption that EMV would usher in a whole new generation of contactless terminals for them to leverage – and that consumers wanted a mobile wallet so badly that it would drive sales of iPhones and use of the wallet.

What they have since discovered is that constraining all sides of the market – consumers who needed special phones and merchants that needed special terminals to support its mobile wallet – delivered the uncertainty that delivered a thin market. Only 3 percent of iPhone users bought the phone for the wallet. The lack of density on either the consumer or merchant side has resulted in neither giving the other side a reason to dig in.

But they’re not the only ones to fall into this trap. It’s a classic matchmaker fail. As authors David Evans and Dick Schmalansee point out in the book by the same name (which officially launches tomorrow, BTW) Facebook got it right when it launched its social network one college at a time. So did OpenTable after it failed at its attempt to launch a national platform and lacked the density in any one city to get diners and restaurants interested. The B2B exchanges of the late 1990s and early 2000s fell into this same trap – and virtually none of the thousands that popped up exist today.


Since everyone in payments like to cite Uber as the poster child for what all mobile payments experiences should emulate, let me use it to emphasize the importance of certainty in creating a thick market.

Uber followed the classic matchmaker playbook: create density of riders and drivers in a city and then move to another, then another. Its magical payments experience that eliminated the friction of paying at the end of a ride was the cherry on top of the sundae. But the reason that Uber is the powerhouse that it is today is that because it eliminates the uncertainty of actually having a taxi show up when the rider needs one.

Uber not only allows a rider to request a car at the precise moment they need one, but the app allows the consumer to track his progress and to contact the driver if it appears he’s off track. It all but eliminates the uncertainty that a driver will appear, and appear in a timely fashion.

That certainty eliminated what was the biggest friction associated with relying on a taxi service. Calling a taxi ahead of time to book a ride yielded less than a 50/50 chance that a cab would appear. Hailing one on the street was even more of a crapshoot, especially when the weather was bad or during the busy times of the day. Yes, Uber made the payments invisible, but the certainty that it delivers to consumers and riders – who also know that they will get a fare when they are working – is the secret sauce to Uber’s success.

Uber created a thick market by delivering certainty.

So, for everyone out there who’s hard at work creating a mobile payments solution, here’s my advice. Ditch the wallet lingo – it’s too confusing. Make the account smart and portable across every channel and device.

And really and truly channel your inner Uber. Certainty is the name of the game in igniting mobile payments. Figure out how you’ll deliver that for the consumer – and you’re golden.