Just as we mark the two-year anniversary of the launch of Apple Pay, the digital wallet has evolved. From aspects of its innovation, to consumer and merchant adoption rates, to what could be next for this method of payment, experts say the shopping landscape still has much room to grow.
As for the past two years and mobile wallets, there hasn’t been the evolution that analysts originally expected.
Payment processing and technology provider Vantiv has kept a sharp eye on this evolution.
“I recollect a year ago being a lot more bullish that the EMV rollout would roll out the red carpet for mobile payment adoption, and it really hasn’t played out that way,” said Tony Rose, Vantiv’s director of product management. Rose told PYMNTS’ Karen Webster recently: “We think, of course, Apple has taken — and Google and Samsung have followed suit — the right approach, and we look at the challenges that have adopted this phase. It’s been a much slower adoption than many people may have thought.”
No doubt, there’s been pretty strong headwinds as far as overall adoption. And the reasons for the slower adoption of mobile wallets have received a variety of speculation. Some say it has to do with the EMV (chip card) implementation; others say it has to do with consumers’ insecurity about security issues.
“Merchant adoption has been challenged by a variety of factors, but a common reason we see is due to the heavy lift of EMV. Both the cost of the implementation, as well as opportunity costs, have pushed out integrations of mobile wallet,” said Andy Wind, Vantiv’s mobile product manager. “Part of the challenge for merchants has also been the fragmentation of offerings in general. We’ve seen the rise and fall of several wallets within this time, and merchants are cautious on which horse to put their money on.”
On top of that, there is the trust issue for the consumer every time a new security breach pops up. And it’s not just payment breaches that cause this mistrust, but rather every type of breach seems to play into the consumer’s hesitancy towards adopting new things.
“Consumer trust is a challenge to adoption as well. Consumers, for the most part, view mobile wallets and technology through a single lens,” said Wind. “Therefore, any threat to security, whether wallet-related or not, challenges a consumer’s motivation to share sensitive information via digital channel. This challenges our industry and is something we must work together to overcome,” said Wind, who quickly added that there is promise on the horizon. “We do, however, see merchant enthusiasm for wallets increasing, as well as continuous improvements in consumer adoption. Additionally, our tech partners are really starting to understand merchant challenges and working with our merchants to address key use cases to help streamline a secure checkout experience.”
Both Wind and Rose believe consumers will eventually get there, especially when good offerings are established. But regardless of the slower adoption, Vantiv believes the mobile wallets industry clearly has an opportunity that is untapped, because it isn’t just about payments.
Payment is only one part of the full experience of mobile wallets. It’s about social media, experience in-store, as well as a slew of different elements.
“The click rate on social media campaigns is phenomenal. These platforms enable ads with highly relevant and engaging content for the end user,” said Wind. “The more tightly a merchant can coil this experience to the conversion of a sale, the more effective these campaigns will be. While payments are only one part of the experience, they are a key enabler, which translates into real value. Mobile wallets help unlock this experience.”
In addition to this, merchants are also concerned with loyalty of consumers, because it is a newer space. Vantiv believes merchants need to innovate around experience. Whether it’s the post-sale account creation or delivery alerts. Or even receipts sent immediately to the consumer.
“I love eReceipts, and I think it’s a paradigm shift,” said Rose. “It’s a way for a merchant to connect with their customer now after the sale. It’s just a totally different message, and I think merchants have a vast scale of how they want to jump in on that and opportunities to cross-sell or audit descriptions or warranty or subscription sign-up.”
Wind and Rose agreed that there indeed may be an endless opportunity with following up with consumers, through eReceipts or other ways, that hasn’t even been tapped yet. Walmart provides a digital receipt with Walmart Pay, and more retailers will likely add this feature for compounding the connection with their customers.
“Merchant payment teams across all verticals are focused on how they can offer a compelling and secure checkout experience,” said Wind. “The enterprise challenge is in the infrastructure requirements to enable some of these new and innovative use cases. For SMB, it’s the challenge of enabling ‘out-of-the-box’ solutions, while differentiating the value offered to consumers.”
Citing Target with 1,800 stores and the fuel industry with a multitude of locations and fuel dispensers, Wind underscored that it’s a huge investment when leaders look at overall adoption rates, which is just a trickle. It can be challenging to redesign the infrastructure based on only a few percentage points to get ahead, but the competition proves that, for many businesses, if they don’t get into the game at all, they lose out more.
“For a lot of businesses, it’s ‘How do we enable solutions that exist today, make sense from a budget perspective and best augment the current experience?’” said Wind. “Mobile wallet is part of the solution, but what a merchant does beyond this will truly give them the best ROI. Features such as delivery alerts, post-sale account creation and eReceipts are new ways to deliver that loyalty experience.”
While banks may be the ones who are most easily able to deliver that experience now, Rose and Wind said merchants and banks will have to collaborate in order to enable favorable use cases that enhance the merchant-customer-issuer relationship.
In the end, there’s much potential, and to look forward another two years, Vantiv sees much simpler integrations for mobile wallets.
“I think there’s opportunity to reimagine point-of-sale interactions and other innovations,” said Rose.