There are, as of last count, approximately 170 mobile wallets of various descriptions worldwide. Some are massive and deep-pocketed and have active user counts in the billions, while others are incredibly small, local and regional, and familiar to almost no one outside a narrow pocket of users in a far-off corner of the world.
The vast majority fall somewhere in between.
And while those mobile wallets vary widely, Boku CEO Jon Prideaux told Karen Webster in a recent conversation, what they all share is a common goal.
“The 20,000-thousand-mile view of all the eWallets is that they are trying to be the force that displaces cash in the marketplace,” Prideaux said.
All wallets, however, are not created equal — and not all of the nearly 200 on the market today will exist in five years. Consolidation and dropout are inevitable, though forecasting who will stay and who will go is beyond anyone’s predictive powers. The state of play remains too much in flux in too many parts of the world.
But there are some early success stories, Prideaux noted, particularly in China, which can offer some guidelines on large-scale mobile payments ignition and its path to global scale in the next decade.
The Power Of A Green Field — And An Emerging Need
In looking for the obvious big winners in a world full of eWallets, Alipay and WeChat Pay rapidly emerge as the undisputed heavyweight champs on the global stage, going from zero to over a billion active users each in under two decades.
The question to ask, Prideaux told Webster, is why China leads the pack — as opposed to the U.S., the European Union, Japan or any of the myriad other places where mobile ignition has been forecast for nearly 20 years, but have not seen anything close to China’s penetration levels.
The simple answer, he said, is need. Consumers are inherently conservative about payments, in most cases preferring a known commodity that is secure and stable over an unknown one. Cards might not be what anyone would invent today because of their various frictions, but they are, by and large, what consumers in developed nations know and trust.
The situation in China was quite different. Alipay emerged out of a marketplace, while WeChat Pay was born from the payments infrastructure to support a chat and gaming app. Both entered a mobile-first internet environment without significant card penetration, leaving them with a large, open expanse of customers who wanted to transact digitally and had no easy mechanism to do so.
“The wallets were the best-suited way to pay online that have emerged,” Prideaux said of their early entrance point. But that was just their foot in the commerce door, he noted – both services quickly expanded their digital payment method beyond the confines of the digital world.
“What they found with the QR code was the ability to offer a seamless transition between the online and offline worlds,” he said. “The developed world had already largely discarded the QR code as too clumsy, too retrograde and too difficult. But in markets where there was a compelling need to enable mobile payments, they were a really simple and efficient way to get merchants online and ready to accept payments.”
The ability to step in and provide service where it was lacking, however, was only part of the equation. Both Alipay and WeChat Pay entered the payments arena with not only a large, built-in user base, but also a big enough scale and deep enough pockets to offer direct incentives to get customers to try something new and build a habit.
And this is where big players have a big advantage, Prideaux said: They have cash to throw at the problem and to get people to try the service.
“In payments, we see that size really counts — for any mechanism in payments, the bigger you are, the more useful you are and the more network effects come into play, and you derive utility from having more participants,” Prideaux said. “This is where the deep-pocketed players have the big advantage. It’s not enough to just pump money at people — you also have to provide something they actually want to use, but incentives are a crucial first step.”
And first steps are just that: first steps. The next big takeaway from the global emergence of mobile wallets in China – and the Asian Pacific region, more generally of late — is that the next steps are about building functionality up and out, and into a host of endpoints.
Building for the Broader Opportunity
What can be hard for users in the west to understand, Prideaux said, is that these eWallet players don’t look at the phones in their hand in quite the same way — nor do they conceptualize payments as something of a one-off distinct function. That is not how their mobile wallets evolved — the payments function was a starting point to solve a specific transactional problem that, over time, grew to become the infrastructure of a host of financial services.
As Prideaux pointed out, that has been a common feature across the mobile wallets in the region that have adopted the Alipay/WeChat model, like GoPay or Grab. The companies aren’t adding payments functionality just for the heck of it, he said, but because they are angling to create full ecosystems built around a functionality like commerce, chat, ridesharing or food delivery — and payments is a necessary element.
“Payment mechanism is a component and lubricant of the wider ecosystem you are hoping to make, and once you’ve done that, you can use that payment method for other things,” said Prideaux.
Once that is in place, he said, that payments infrastructure then allows the platform to turn its purview even more widely, and even begin to contemplate connecting to global merchants. That is where Boku often comes into the equation, Prideaux said — when global marketplaces are looking to add that layer of connective tissue that allows them to step outside of their own vertical and ecosystem and offer their trusted payment method in a wider number of locations.
The global players, he noted, are eager to make those connections, and local eWallets want to expand their functionality — which creates the opportunity for Boku to help make those connections.
And regarding the idea that a set of standards for interoperability will be necessary for eWallets to work on a global scale, Prideaux has his doubts. In a card-based world and a four-party system, a lack of interoperability led to having a half-dozen payment terminals on a merchant’s counter, but the technological world of mobile wallets is quite different.
“The inevitable result of interoperability is that it ultimately means you can only move as fast as the slowest boat in the convoy,” he said.
In a more technologically advanced world, where a bunch of non-interoperable QR codes are stored in a single iPad terminal where the consumer can easily pull up the right one, there isn’t the same level of a hurdle. And in the absence of a real benefit to the consumer or merchant experience, Prideaux said, the push for interoperability may not have as much of a pull, and could even take a toll on the pace of innovation.
And at this point, as the pace of innovation is picking up worldwide, said Prideaux, the players who survive will be the ones who can get ahead of it.
Southeast Asia is leading the world in mobile wallets, particularly China. But the developed world is finally starting to move forward, and Prideaux believes habits are noticeably changing.
Apple Pay may not have converted the world in a year, but the slow and steady accumulation of users over the last five years looks like progress on some level, but not nearly enough on others. The problem with anticipating change in payments and commerce, Prideaux noted, comes with assuming it will be fast.
“It doesn’t have to be fast,” he said. “We are seeing that big change is coming, but it won’t be an explosion. It will be a continual movement of consumers away from cards and toward their phones.”