As financial institutions increasingly create specialized credit and debit cards and merchants continue to push loyalty cards, the overwhelming abundance of plastic could create a greater need for a mobile wallet than any other consumer incentive.

Mobile-wallet providers are gradually updating their software to serve this need. Google in August made it easier for consumers to add their bank-branded cards to its mobile wallet, and card account aggregation is the main feature of Apple's new Passbook wallet. Providers like Isis and Lemon also designed their wallets to accommodate cards from multiple providers. 

"A lot of people say the cards and payment industry is absolutely due for a revolution," says Bob Egan, founder and managing director at The Sepharim Group. "Mobile wallets have a chance to make this happen."

According to Egan, the average American family carries seven cards, but uses only two to three on a regular basis.

In January 2010, U.S. consumers held 609.8 million credit cards, according to the Federal Reserve Bank of Boston. In addition, 80% of U.S. consumers surveyed had a debit card in 2010, eclipsing the 78% that own a credit card. Plus, according to the same survey, 60% of consumers had a rewards card of some kind. 

And every day, banks, retailers and even technology companies create and launch new card products. Last week, Google launched its AdWords Credit Card in the UK, specifically for AdWords advertising purchases. A few days later, the upscale yogurt merchant Pinkberry developed the plastic Pinkcard that connects with the company's mobile app. 

While consumers' card relationships may not substantially change as payments go digital, Egan says, larger companies "like Bank of America, Chase and Apple that dominate the front of wallet share and the processes behind them can't rest on their laurels."

The big players are working on mobile wallet initiatives, but most are still in the early stages.

Isis, the mobile-wallet venture formed by AT&T, Verizon Wireless and T-Mobile, has the support of several large issuers but has yet to launch its long-awaited pilot in Salt Lake City and Austin, Texas.

Google's mobile wallet, Google Wallet, has the support of prominent retailers but struggled in its first year to attract issuers. A recent revision to Google's software made it easier for card issuers to work with Google.

Apple's Passbook doesn't come with a built-in payment function, but it works with established mobile payment apps such as the Starbucks Card app. Passbook users can also load airline boarding passes, move tickets and baseball tickets. The app generates a quick-response (QR) code for merchants to scan at the point of sale. (Apple declined to discuss its Passbook strategy for this story.)

"We're in sort of a transitionary time where many people are looking to take their plastic cards to a more digital offering," says Ben Bajarin, principle analyst at Creative Strategies, Inc.

Bajarin says real-time data is the biggest advantage of using a mobile wallet. The goal is for consumers able to view points and how many points they need to reach a milestone, to utilize specific payment methods more frequently.

According to a Carlisle & Gallagher Consulting Group survey (pdf) of 605 U.S. consumers, 48% of participants have interest in mobile wallets. 

"People are fascinated by [payments technologies] once they know about them," says Egan, who was asked by several people about the Dunkin' Donuts payment app when he bought his breakfast with an iPad. "The problem is getting people aware of this type of technology."

The lack of consumer knowledge can be blamed on marketing expense and the laboriousness of changing consumer behavior. But the biggest hurdle is the emotional response consumers attach with their money, Egan says.

While consumers are intrigued by mobile wallets, many fear security issues and malfunctions, he says.

The most successful programs implemented on mobile devices have been loyalty cards and apps focusing on management, says Bajarin. These programs are the first step in the consumer behavioral shift.

The spread of the EMV chip-card standard will also serve as a catalyst, as it forces consumers to change their habits when making card payments.

"By 2014 or 2015, you'll really start to see [mobile payments] trickle down into the larger buying populace," Bajarin says.

As more cards saturate the market, people will look for a product to house and manage those cards instead of fumbling through a wallet busting at the seams.

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