In 12 short months, the proximity payments space has experienced quite the change in face. Smaller ventures have largely failed while high-profile initiatives like Google Wallet continue to exist but have repurposed away from proximity pay.
Clinkle is now a very ordinary P2P offering for college students and Dwolla remains a payment solution that most consumers have never heard of. LoopPay has failed to gain traction due to the expensive hardware required and a use case that is limited to payments. Finally, after decommissioning its original wallet app, Square has hardly moved the dial with Square Order.
This movement in the m-wallet space poses a number of implications to its stakeholders. Consumers are becoming increasingly familiar with solutions that are actually relevant while merchants begin to invest in point-of-sale infrastructure that supports them. Banks have endorsed solutions that don’t erode interchange. For telcos, the remaining vested interest lies with Softcard (thanks to HCE).
With all of this said, we would expect to see far less fragmentation in the ‘wallet wars’ in 2015. Seven mobile wallet apps appear relevant entering the new calendar year. These include: Apple Pay, MCX’s CurrentC, Google Wallet, LevelUp, PayPal mobile, Softcard and Starbucks mobile. Though very different in terms of platform and associated spend categories, all seven wallets have a chance at becoming a long-term player in proximity payments.
The big disruptor of the group is, of course, Apple, which launched NFC-based Apple Pay in late October. Interestingly enough, Apple’s selection of NFC as a payment transmission technology may have strengthened the positions of Android-oriented Softcard and Google Wallet, whose challenge up until now had been convincing merchants to accept NFC payments in stores.
One notable disparity in Apple’s mobile wallet relates to customer incentives. In-store Apple Pay does not deliver a direct use case outside of the payment itself – while its competitors place emphasis on discounts, deals and coupons. To address this consumer demand, Apple is rumored to be developing a loyalty program, which will likely be integrated with the in-store marketing capabilities of iBeacons.
Over the next three years, the proximity payments space is apt to evolve even further, with the exit of one or more of the solutions listed above. Survivors will be subject to the threat of new entrants and prospect of new partnerships with financial institutions.
In this three-year time frame, I look for PayPal to fall out of favor in proximity pay, returning to its flagship services of online and P2P pay. LevelUp and Starbucks should maintain their niche in QSR payments with gamification-based use cases. A single solution will prevail for Android-based payments – and my money is on Softcard over Google Wallet until a better wallet comes to market. The most interesting battle – Apple versus MCX – has already begun, even while CurrentC is months away from public launch.