Mobile wallet analysis: Evolution, Challenges and the Way Ahead

Digital wallet segment in the Commerce and Payments sector is buzzing with activity since the last couple of years. Though, the adoption has not reached any sort of tipping point but it has garnered a lot of interest. With multiple industry reports/sources estimating the market (Mobile Payment) to grow to trillion dollars in size over the next five years, the current traction doesn’t seem too encouraging.

Mobile wallet evolution:

exhibit1                  Source: LTP research and analysis

Mobile wallet concepts started out as early as 2000. With growing penetration of smart phones across the US, certain players starting looking at replacing plastic cards with always-on, ubiquitous mobile device. We see that the industry has evolved into its current state along three noticeable phases (not water-tight).

Phase I: Inception/Ideation (Before 2010)

This is the period during which nobody was really excited about mobile wallets. This phase is characterized by extremely low scale of adoption. This phase started with Desktop based SAAS products and mobile apps being primary enabling technologies. From a consumer perspective purchase option were really limited with few major retailers (like Starbucks) adopting m-wallet. Storing information onto the wallet was done through manual entry on the wallet website or mobile device looking at your card. Most of wallets were company branded with few white label options.

Phase II: Exploration (2010-12)

This is the phase where Tech press went crazy about mobile wallets. Phase II of m-wallets have been more of exploratory phase with multiple start-ups and large companies trying out combinations of enabling technology, loading options and product strategy to drive customer adoptions. Players became more aggressive about merchant acquisition. NFC, QR codes were the major enabling technologies used for making m-wallet products. For NFC, the additional cost of hardware and thereby availability at both merchant and customer end remained a challenge. This phase is also characterized by the emergence of white label solutions such as SeQR, Paydiant and others. Adoption grew with retailers such as Dunkin Donuts, and others launching their m-wallets. Adoption was still in its infancy.

Phase III: Early acceptance (2012 onwards)

In no time, mobile wallets became popular in Silicon Valley and NY alley with more than 100 players now participating in the US m-wallet industry. With launch of Google wallet, ISIS and Paypal wallet market seemed to be at the cusp of explosion. Though the ISIS numbers have not been encouraging since launch, market is slowly expected to pick up in this early acceptance phase with stronger awareness among the end user. Omni-channel wallet options are allowing stronger acceptance at retailers. On the other hand, merchants have also realized potential of m-wallets and few large merchants like Wal-Mart, K-mart, Kohl, Sears and other have launched their own MCX wallet.


There are more than 100 mobile wallet companies operating in the US alone. Though, the vicious circle of low adoption among consumers and acceptance infrastructure at merchants is creating a hurdle for mobile wallets to explode.

exhibit3                    Source: LTP research and analysis

Perceived security threat and lack of privacy over mobile payments is considered to major factor inhibiting the m-wallet adoption. At the same time, lack of rules governing mobile payments transaction makes consumer more cautious making such payments. Many major mobile phones manufacturers are yet to adopt the proximity technology like NFC for payments. Apple is one of such major manufacturer in US.  Apart from technology and security perspectives, the consumers currently do not see a strong incentive in form of making their world wallet free, without a scope of integrating multiple loyalty, rewards and payment cards into one.

On the other hand, additional cost for NFC POS is major hindrance for merchant adoption. With no technology emerging as clear winner, retailers are playing wait-n-watch game resulting in less than expected adoption. Mobile wallets need to integrate with retailers existing CRM to have more tooth and drive strong adoption.

Players to watch out for:

With m-wallets in early acceptance phase, it is difficult to predict the winners. But somebody has got to do it for the benefit of the merchants as well as consumer adoption. We have been working on an evaluation framework with several parameters across 4 categories (Merchant Acceptance, Solution Cost and Functionality, User Adoption, Brand and Future Potential) to identify winners among the 75 serious m-wallet players in the US. As a part of this article series, we would discuss the framework and results in the subsequent articles. Please follow this space for “Mobile Wallet Evaluation Framework”. This will be an ongoing effort and the results will be updated based on market dynamics every quarter. Many experts in the US market are going through it for cross-validation. If you want to contribute to the rankings as an expert, or participate as a company please write to us through the contact form 

Also Read Part 2  Mobile Wallet Analysis (Part 2)

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Amit is a cashless payments enthusiast and advises companies in this space. He runs a successful Payments/ICT consulting firm ( that serves Fortune 1000 clients and growing firms globally. He is an early investor and regular author for Lets Talk Payments. He is helping LTP become the biggest and most useful payment resource in the US, Asia and Europe.
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