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Non-Banks Take Early Lead in Mobile Wallet Race

A report from Carlisle & Gallagher finds that nontraditional financial institutions are the current mobile wallet frontrunners, though the battle is far from over.

A new report from management and technology consulting firm Carlisle & Gallagher Consulting Group that examined 20 mobile wallets found that offerings from nonbanks are the current frontrunners, though the mobile wallet wars have just begin.

Carlisle & Gallagher evaluated the wallets based on depth of payment capabilities and ease of the overall consumer experience. The report found mobile wallets from LevelUp, PayPal, Square and Starbucks were the front-runners among current offerings. These mobile wallets were noted for their easy set-up, ease-of-use and ability to tie rewards to payments, among other features.

However, Peter Olynick, C&G’s Card & Payments practice leader, cautions that it's still too early to make definitive conclusions about the mobile wallet market.

[See Also: Google, Apple, PayPal Pose Mobile Wallet Threat to Banks]

"I think of this as lap one of a marathon," Olynick says. "Some of the folks out there have sprinted to the forefront with payment capabilities, some are in the piloting stage, and it is too early to be declaring victors in this type of race. People are just starting now to get a sense of what they want to do."

Olynick says that the mobile wallets that have stood out so far are ones that have an easy user experience and are intuitive to set up and use.

"It shouldn't require an advanced degree from a technology institute to use," he says.

The report looked at mobile wallets that use NFC, QR barcodes and cloud-based transactions, and Olynick believes that it won't be just one type of payments technology that dominates the mobile wallet landscape.

"I really don’t believe there is going to be one technology that will rule them all," he adds. "I think it’s all going to come down to the user experience you offer, the enhancements that are there, if it's intuitive, and if you mitigate security concerns."

Olynick firmly believes that the mobile wallet will become the dominant payments mechanism in the future, and predicts the "tipping point" will be in 3-5 years. He points to a national consumer survey conducted by C&G in April 2012 that found that 48 percent of U.S. consumers were interested in using a mobile wallet.

He says a lot of the enthusiasm for mobile wallets will be driven by the young and the affluent consumers, but it's broad appeal will come from the unique features it can offer that other payment devices can't, such as real-time incentives and the ability to share purchases on social media.

Olynick also notes that people who are interested in a mobile wallet "clearly indicated" they would want one that could store multiple cards from multiple financial institutions, and have more than one payments technology.

Bryan Yurcan is associate editor for Bank Systems and Technology. He has worked in various editorial capacities for newspapers and magazines for the past 8 years. After beginning his career as a municipal and courts reporter for daily newspapers in upstate New York, Bryan has ... View Full Bio

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Nathan Golia
Nathan Golia,
User Rank: Author
1/28/2013 | 4:51:57 PM
re: Non-Banks Take Early Lead in Mobile Wallet Race
Seems like what these companies have in common isn't just that they aren't banks G rather, it's all companies who grew up on the web or with a critical mass of web-savvy customers. One of the challenges in innovating is finding reasons to shed the old ways G traditional FIs with older customers weren't pressured in the same way Square and others were early on with an expectation of a particular online experience.
User Rank: Apprentice
1/29/2013 | 1:44:32 AM
re: Non-Banks Take Early Lead in Mobile Wallet Race
Could it be that the banks are biding their time? If my bank had a mobile wallet/mobile payments solution (beyond bill pay, but true merchant and online/e-commerce payments) that worked at a majority of the merchants I frequent (from coffee shops and grocery stores to gas stations and movie theaters and department stores), I'd be all over it. Because I'm pretty sure my bank's going to be around, I feel I'm at least one less step removed from the financial entity, and they have a bit of a stake in my relative success as a consumer. All of these other players just seem to want a piece of me -- that piece being my data and behavior.
User Rank: Author
1/29/2013 | 3:34:45 PM
re: Non-Banks Take Early Lead in Mobile Wallet Race
-Good point, despite the general negativity surrounding people's perceptions of banks, most surveys say consumers still trust their bank with their finances rather than Apple, Google, etc. Bank's probably don't feel like they have to be early innovators on the mobile wallet, and can instead wait and see when the dust settles what types of mobile wallets become preferred and go from there, although that's not to say banks aren't offering this kind of product, some have begun to.
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