Businesses looking to gain some ground in the digital wallet landscape should treat providing mobile payments as an opportunity to better serve their customers – and as more than just another way to pay, experts agree.

As paying with a smartphone or via the Internet is becoming more commonplace in e-commerce, coffee shops and transit stations everywhere, the mobile payment space is shaping up to be an industry that’ll be interesting to watch, said financial analysts Jason Armitage and Jordan McKee of Yankee Group, a Boston-based research firm. The two analysts were speaking from an online Webinar held Tuesday.

Cash-less transactions have traditionally been the province of banks and credit card companies, McKee said. But while adding digital wallets to already-existing online banking shows promise, banks have been slow to deliver mobile payment services.

That means digital wallets have an opportunity to offer something more to their consumers, if they want to be competitive.

“Right now, you can’t just go out without cash or cards and just a phone to make all the transactions you need to make in a day … [but] the available offerings just aren’t compelling enough to get consumers to ditch their credit cards,” McKee said.

“Consumers don’t need another way to pay or another form of credit card.”

Current available offerings like Google Wallet and Square Inc. are only making up a small number of point-of-sale transactions, he added. In a March 2013 study of 4,000 consumers in the U.S., the Yankee Group found only 14 per cent of people had actually used their digital wallet to make a purchase in the last three months. Yet 68 per cent of respondents said they were interested in paying for goods and services via mobile.

So there are clearly opportunities for businesses to build better digital wallet services, if mobile payments are to escape the “early adopters only” zone, said Armitage.

“The question becomes, will any big Internet players come through on mobile wallets? Google has trump cards in its hands, but there could be surprise players in the future,” he said.

What mobile payment businesses should be doing is providing value-added services as well as the basic mobile payment option to their customers, McKee said.

For example, they could streamline peer-to-peer services, making it easier for friends and family to send each other money via mobile payment. This might be particularly useful for youth who are too young to have their own credit cards, but who might get allowance from their parents.

Businesses might also consider bundling personal finance tools in with their digital wallets. McKee cited the hugely popular personal finance app, Mint, as something that would pair really well with a mobile payment service, since consumers would be attracted to the ability to budget and monitor their spending habits.

Even more enticing would be value-added services like personalized coupons. While coffee giant Starbucks Corp. has its own mobile payment app, complete with loyalty program and perks for its members, it’d be even better if more mainstream mobile payment providers gave their customers the chance to get coupons from stores they regularly shop at, McKee said.

Still, he cautioned that coupons have to be implemented properly, if they’re going to help mobile payments gain any traction.

“Coupons could be the saviour of mobile payments … but they need to be more relevant to consumers. Otherwise businesses are just giving away money,” he said. “It’ll certainly be interesting to watch as data and analytics make it [easier to monitor].”

And to offer coupons that customers want, digital wallet providers need to be prepared to strike up partnerships with major brands and retailers, Armitage added.

Right now, PayPal Inc. holds the top spot when it comes to in-store mobile payments, with 13 per cent of customers making it their digital wallet of choice. Another 11 per cent are dedicated to other kinds of digital wallets, while five per cent use the Starbucks app.

Still, 80 per cent of customers don’t use any form of digital wallet, something that a savvy business could tap into, especially if they’re offering consumers something extra, Armitage said.

“Wallets that are very payment-centric don’t do so well … they’re not enticing,” McKee said. “The sooner wallet vendors capitalize on [offering more services], the sooner we’ll see a paradigm shift.”

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  • Good article, and I completely agree – mobile wallets that just simply conduct payments are not enticing enough for consumers to actually ditch their physical wallet. The implementation of voucher/coupon redemption through a mobile wallet device would definitely be a strong pulling factor for many shoppers. I actually work for a mobile wallet company over in the UK that are looking to release the wallet app compatible for IOS and windows phones this July. Our app is called Zync Wallet, which not only conducts payments but allows consumers to download various offers and vouchers and redeem them through their mobile. Plus with the Zync Wallet, consumers can sign up to as many loyalty programs as they wish, which then automatically adds points when they shop with their mobile wallet in that particular store. I’ve written a blog that details the Zync Wallet app, so feel free to comment!

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