More retailers are accepting mobile wallets, but few agree on what that entails. Individual stores are coming up with their own wallets by building on past successes or burying payments deep under the surface of their mobile channel.
This market has come a long way since the one-size-fits-all strategy behind the Merchant Customer Exchange's CurrentC wallet, which sought to solidify merchants' control of customer data. Ultimately, the stores behind MCX — including heavyweights Walmart and Target — realized that they didn't need to confront Apple Pay or Android Pay head-on.
Today's mobile-savvy consumer might have a variety of retailer apps on their phones, but they probably do not think of them as mobile wallets. In addition to payments, these apps handle marketing, loyalty, rewards and customer service — often linking to programs that shoppers regularly use in other channels.
CVS Pay's contrarian approach
CVS has always had an odd relationship with mobile wallets. It switched off NFC acceptance in 2014 to protest Apple Pay's launch (and express solidarity with the now-defunct CurrentC retailer wallet), and never bothered to switch NFC back on in the years since.
Instead, CVS developed CVS Pay, which recognizes that the biggest pain point in CVS stores is not the process of moving money, but the many other interactions that occur at the point of sale.
A customer getting medicine may need to provide a prescription, ID, birth date PIN, loyalty card and other information before they even get to the payment. By putting all of these things into a mobile app, CVS is attempting to remove every obstacle that leads up to the payment.
Walgreens, a CVS competitor, has taken a similar approach to mobile technology. Its 2011 "Refill by Scan" feature lets consumers request prescription refills by scanning bar codes with a smartphone's camera. The Balance Financial Prepaid Mastercard, launched in 2013, similarly streamlines the experience by combining a payments card with a loyalty card.
CVS will rely on its customers' existing use of digital technology to drive adoption of its mobile payments app. The CVS Pay feature is designed to tie into other interactions that come before the payment. In this way, it is similar to the wildly successful Starbucks app, which provides a way to reload balances and check rewards before the customer needs to make a payment.
Kohl's Pay puts loyalty first
Kohl's department stores joined the mobile wallet movement in 2016, offering customers the option to link their closed-loop Kohl's Charge cards to the company's mobile app to make mobile payments and redeem rewards.
Kohl's Pay allows more than 25 million active Kohl's cardholders nationally to pay for in-store purchases through their mobile phone while also applying any Kohl's offers, Kohl's Cash and Yes2You Rewards at checkout.
In that manner, Kohl's brought a consumer mobile experience with reward redemption at the point of sale that other wallet developers have struggled to incorporate the past few years. Kohl's was an early supporter of Apple Pay in 2015, and last year added the capability of earning Kohl's rewards when customers used their Kohl's card through the Apple Pay wallet.
Prior to adding Kohl's Pay, the company says the Kohl’s mobile app already had more than 14 million downloads, with a key feature being the option to scan and store Kohl’s gift cards, Kohl’s Cash and savings offers.
Target's long overdue (and undercooked) Wallet
After nearly two years since the news broke of its plans to launch its own digital wallet, Target has finally launched Target Wallet, but describing the launch as new may be something of a stretch since it’s essentially an augmentation of the pre-existing Cartwheel digital coupons and discounts feature in its app, with payments now embedded into the coupon redemption capability.
Target Wallet is also somewhat restrictive in its payment options since payments can only be made using Target’s own REDcard — but this could also be seen as its strength, given that REDcards were used in 24.2% of Target sales in the third quarter.
Target’s strategy ensures that the retailer gets holistic control of the customer experience and, more importantly, can track purchase activity without customer credentials being obfuscated by third-party tokenization.
Target, like Walmart, probably has a sufficiently broad and loyal customer base to make the provision of a standalone mobile payment platform viable. However, allowing other types of payments beyond REDcard within the wallet may be required in order to gain more widespread traction.
What's up with Walmart Pay?
When Walmart switched on Walmart Pay last year at 600 stores in two states, it marked a baby step into a new era of retailer-controlled wallets.
At first glance, the Bentonville, Ark.-based retailer's mobile payments approach looks decidedly low-tech, asking consumers to scan QR codes rather than duplicate the wireless magic of Apple Pay or Android Pay. It also sticks to familiar funding methods such as credit and debit cards and seemingly does nothing that hasn't been tried before.
But Walmart’s strategy is anything but simple. A year after the wallet's launch, it became a means of issuing credit to Walmart shoppers.
Customers approved for Walmart’s store-brand credit card or its Walmart Mastercard may immediately use those accounts to pay via a virtual card within the Walmart Pay app. Synchrony Financial is Walmart’s credit card issuing partner.
How Speedpass became a wallet
ExxonMobil's contactless and mobile payment system, Speedpass, is well known as a way to help drivers accelerate the payment process after they fill up on gas.
Speedpass dates back to 1997, when it operated as a wireless keyfob that motorists used to pay for fuel. The latest version, called Speedpass+, is an app-based payment system that debuted in March of last year and now works at 90% of ExxonMobil's more than 11,000 stations nationwide.
Technology has helped bring ExxonMobil's gas station operators on board with both Speedpass+ and Plenti, said Bryant Russell, ExxonMobil’s U.S. program manager for mobile payment and loyalty.
The Speedpass+ application, which is integrated with the Plenti multi-merchant loyalty system, interacts with gas station equipment via geolocation technology that recognizes Speedpass+ users. “There’s no change from a hardware point of view,” Russell said.
Speedpass+ also allows customers to apply for and begin using an ExxonMobil credit card in the application before the physical card arrives in the mail.
ExxonMobil also supports other high-tech payment options such as the Apple Watch or a Ford vehicle with SYNC 3 technology. "It’s incumbent on us to innovate and stay in touch," Russell said.
Starbucks' shocking mobile momentum
No list of mobile wallet innovators would be complete without Starbucks, which accepts 30% of all U.S. transactions through mobile as of July.
The Starbucks app is a rare early success story for mobile wallets, which have traditionally stumbled due to lack of retailer support. Starbucks chose to play to its strengths by building its app on top of the coffee chain's wildly successful gift card program — and address its own pain points by integrating rewards and reloads into the app, alleviating the need to manage those tasks at the cash register.
It also added fast-growing features such as Mobile Order & Pay, which accounts for 9% of all U.S. transactions as of July.
Starbucks also is shifting to a cloud-based platform to support its rewards program, enabling more flexibility, including the ability to give special rewards to subsets of customers.
Dunkin strikes back against Starbucks
Dunkin' Donuts' popular QR code-based app came from the same masterminds behind the Starbucks app (after they left Starbucks to found CardFree), but it was designed with different use cases in mind.
The companies have different audiences and a different focus for their apps. Dunkin' says its customers are less likely to hang out at their stores and are more interested in getting their food and drinks and heading on to their destination.
Thus, the Dunkin' app was designed with a focus on mobile ordering and gifting to reduce the need for human interaction.
Dunkin' Donuts expected consumers would embrace the convenience mobile payments added to their routines, but it didn't expect to see the growth of new products mobile payments inspired, including a huge surge in gift cards sold through the app.
Processing transactions quickly enough to serve digital commerce comes with arduous upgrades and complicated choices, but that's only the stick. The carrot is people like faster payments, so there's plenty of opportunities to boost payment revenue.
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