Gearing Up for Mobile Wallets

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Gearing Up for Mobile Wallets

By Howard Wolinsky - 09/15/2013

When it comes to mobile wallets, many grocery shoppers and retailers are talking the talk, and a few are beginning to walk the walk.

Digital or mobile wallets are plastic cards and smartphone apps that offer stored value and conventional credit and debit cards, often for more than one retailer. They also can collect and disburse loyalty points and gift cards, display and redeem coupons, create grocery lists, display nutritional information and offer price comparisons.

About 70 percent of consumers are interested in adopting mobile payments, according to an August study by The Yankee Group, yet fewer than 14 percent said they had completed a mobile transaction in the previous three months.

"While consumers and merchants remain intrigued by mobile wallets, no single solution has emerged victorious," says Jason Armitage, principal analyst at the Boston-based Yankee Group and co-author of the report, "Mobile Wallets for the Masses."

"As the market matures, solutions that deliver actual value for consumers and merchants will proliferate, and clear winners and losers will become more apparent," he says.

In the grocery industry, few mobile wallets currently are in operation. As a result, adoption is lagging, says Vic Tortorici, vice president of sales, grocery channel at Marqeta Inc., an Emeryville, Calif.-based developer of stored-payment cards for multiple retailers.


"I think there are several factors that are impeding adoption. No. 1, demand [grocers don't see an immediate need] and No. 2, people are comfortable using their existing payments cards like credit or debit."

– Vic Tortorici,

Marqeta Inc.


"From my knowledge of the grocery industry and my interaction with grocers, penetration today is sparse. I think there are several factors that are impeding adoption. No. 1, demand [grocers don't see an immediate need] and No. 2, people are comfortable using their existing payments cards like credit or debit," he says.

Grocers don't seem to be in a rush to embrace mobile wallet technology, Tortorici says. However, clear signs of interest are increasing. A few independent grocers are exploring different applications for mobile payments, he says, including a Southern California independent that deployed a mobile payment platform and soon found that only a handful of shoppers were using the system in any given week.

A GOOD FIT FOR GROCERS?

Consumers spent $500 million on mobile commerce in 2012, according to Sweden's Berg Insight, with most of that consisting of Starbucks prepayments. Berg projects that the mobile wallet market will grow into a $35 billion market in 2017, albeit still tiny compared with the market for credit and debit cards.

The going may be slow now, but Chris Gardner, co-founder of Boston-based Paydiant, which developed a cloud-based mobile wallet with cardless ATM access, says mobile wallets are a good fit for grocers.

"Grocery stores are an ideal category for mobile wallet functionality because of their combination of frequent visits, loyalty, concerns about payment costs [due to tight margins] and a desire to increase lane speed," he says.

Grocers also can automate the processing of loyalty cards by building that function into the mobile transaction. By combining coupons and offers in a single transaction, they should speed the flow of traffic in checkout lanes, Gardner says.

In the realm of aggregated wallets, or third-party apps used with credit cards only, various options are available. Google Wallet uses Near Field Communications (NFC), available on some Android phones, to store card numbers on the phone. NFC devices are waved near a point-of-sale device to execute the transaction. So far, Apple has not adopted NFC for its phones, but some providers reportedly expect to develop NFC-enabled sleeves on iPhones.

Isis, a joint venture of AT&T, Verizon and T-Mobile, also uses NFC technology to store credit card information on a "secure element" in the phone's memory, and it provides the information at point-of-sale. Paypal, one of the original players in the online payment space, offers a solution that stores card information in the cloud.

Home-grown mobile wallets are another option. For example, a retailer app might work with a store gift card only, while apps from Dunkin' Donuts and Starbucks store the barcode and card number on mobile devices.

"White label" wallets like Paydiant are cloud-based and bear a retailer's name but are developed by a third party. Jeremie Leroyer, founder of Paris-based Airtag, has provided mobile wallets to Groupe Casino, a French mass retailer with more than 1,200 grocery stores worldwide, and Carrefour S.A., one of the largest hypermarket chains in the world.

"What people are looking for today is, how can I use my smartphone when I am in the store to have additional value, additional services, and a new shopping experience? Our focus is not on payments only but all these value-added services that merchants can provide to their shoppers through smartphones," he says, such as paperless coupons, gift cards and loyalty points.

About 15 percent of Casino customers have signed on. Leroyer says 50 percent of these consumers have a higher-than-average check-out total.

Isis, a joint venture of several phone companies, stores credit-card info in a phone for point-of-sale retrieval.

"I think for grocers, the really big opportunity is with relatively modest investments in platforms that make it easy to get into digital," says Tim Attinger, group vice president of strategy and innovation at Blackhawk Network, a Pleasanton, Calif.-based spinoff of Safeway that develops prepaid products such as GoWallet, a free online and mobile service to manage gift cards.


"I think for grocers, the really big opportunity is with relatively modest investments in platforms that make it easy to get into digital."

–Tim Attinger,

Blackhawk Network,


Grocers can drive engagement and cultivate an ongoing promotional relationship with consumers at a fairly attractive cost using a platform, Attinger says. He says investment in mobile wallet technology can be repaid through repeat business, increased market baskets and increased information to the consumer.

Troy Alstead, Starbucks' CFO, said at the Jefferies Global Consumer Conference in June that about one-third of the company's transactions go through its stored value card program. "In addition to driving efficiencies and lowering transaction costs, the biggest win from the program is that it's very 'sticky,' by virtue of the fact people have preloaded their money onto the card in anticipation of coming transactions," he said.

COLLABORATIVE EFFORTS

In part to maintain their direct relationship with customers, a number of retailers started the Merchant Customer Exchange, or MCX. They include Best Buy, CVS, Lowe's and Sears as well as grocers Hy-Vee, Meijer, Publix, Target, Wakefern and Walmart.

The group intends to offer merchants mobile commerce that can seamlessly integrate consumer offers, promotions and retail programs, says Jeremy Mullman, spokesman for Dallas-based MCX. The application will be available through virtually any smartphone, though a launch date hasn't been announced.

"The merchants who started MCX view the coming shift to mobile commerce as an opportunity to improve the shopping and buying experience for customers and merchants alike," Mullman says.

"Some of the other emerging models out there are built around sharing that data with a merchant's competitors in order to make relevant offers to the same customer. Merchants, not surprisingly, do not like that," he says. "Merchants know their customers best, and are best positioned to build something that improves their shopping and buying experience."

MOVING AHEAD

Instead of viewing mobile wallets as just another payment platform, grocers and other merchants should consider how a digital wallet can solve problems, Gardner says.

Harris Teeter Inc. worked with Paydiant to develop a mobile wallet dubbed "HT Express Pay" for a pilot of its Express Lane online shopping service in Matthews, N.C.

Consumers use HT Express Pay on their smartphones to scan a QR code presented on a Verifone mobile point-of-sale device at an Express Lane curbside pick-up location, Gardner says. The consumer picks a credit card on his or her mobile wallet and taps a "pay" button. A digital receipt is sent to the consumer's mobile device.

Though options abound, merchants often are concerned about losing control of their shopper data, especially with some cloud-based wallets, says Jim Stapleton, chief sales officer for Isis, a New York-based joint venture between AT&T Mobility, T-Mobile and Verizon Wireless chartered with developing a mobile commerce platform.


"The dialogue we're having happens in every discussion that I've had with a merchant. They absolutely want to know what's going on with their data. It's important to them. They value it."

– Jim Stapleton,

Isis


"There is a natural conflict that emerges with some of the solutions," he says. "The dialogue we're having happens in every discussion that I've had with a merchant. They absolutely want to know what's going on with their data. It's important to them. They value it."

Chicago-based business and technology writer Howard Wolinsky is a regular contributor to Retail Leader. His work also has appeared in BusinessWeek, Chicago Tribune, Crain's Chicago Business and Chicago Sun-Times.