The recent launch of Walmart Pay, from the world’s largest retailer, highlights the growing fragmentation and complexity in the mobile wallet market. Although the market won’t support an endless amount of wallet platforms, there is ample room for offerings from major merchant brands to coexist. Ultimately this will provide merchants with the means to reach consumers and shake up the economics of payments. This is an opportunity for issuers and vendors because demands for payments-as-a-platform capabilities are set to increase.
Walmart is building on the Starbucks model rather than CurrentC
The best-laid plans of wallet providers can crumble surprisingly quickly when faced with the challenge of gaining consumer conversions to any new platform, let alone actually growing transaction volumes. Although Walmart claims it still supports its cross-merchant wallet, CurrentC, from the MCX consortium (of which Walmart was the leading proponent), launching Walmart Pay is a kick in the face of the struggling platform before it even launches. Rather than bog itself down with a troubled platform, Walmart is leveraging its existing, and already successful, Walmart instore app – much the same way Starbucks did with its hugely successful prepaid card program. Ovum expects take-up to be significant in the near term.
Critical to Walmart’s shift in approach is the fact Walmart Pay will be open to tie in to any form of payment, opening up consumer choice, but also providing the ability to link directly to consumer bank accounts. It’s probable that Walmart will incentivize ACH payments on the platform and ultimately help reduce interchange costs on traditional payment cards. Other members of the MCX consortium are likely to proceed with their own plans and indeed Apple Pay and Android Pay integrations in the near term.
Ultimately the launch of Walmart Pay highlights what is likely to be a period of fragmentation and direct competition in the mobile wallet space. Not every merchant will be capable of launching and supporting their own wallet; however, there is ample space for many merchants to do so. Merchant-led apps already hold significant mindshare among consumers, and adding proximity payment capabilities is increasingly feasible through the use of APIs, tokenization, and white-label wallet strategies. Expectations of one single disruptive giant to emerge in the mobile wallet space looks increasingly unlikely. Instead the market will see a significant expansion of mobile wallet availability to consumers, and with greater availability, greater consumer take-up. For issuers and vendors this creates new opportunities in the growth of broader payments-as-a-platform capabilities.
2016 Trends to Watch: Payments, IT0059-000037 (December 2015)
Tokenization in the Payments Value Chain, IT0059-000027(September 2015)
Ovum Decision Matrix: Selecting a White-label Mobile Wallet Platform, IT0003-000633(December 2014)
Gilles Ubaghs, Senior Analyst, Financial Services Technology