Payments players with digital wallet aspirations — including Visa, MasterCard, Google, PayPal, Apple and Isis — are all vying for customers' virtual pocket books in a race to truly electronic transactions. Yet none have had much luck, so far.
There have been delays in launches (e.g. Isis's delays on launching in its two pilot cities); changes in the way at least one major, digital wallet innovator processes its transactions (think: Google Wallet); and, most importantly, a lack of features appealing enough to spur widespread adoption.
"Mobile wallets have been around for a while, and even for us, in the industry, we are only just starting to adopt these technologies," says Philip Philliou, a payments consultant. "I don't think anyone is far ahead in terms of disruption. We are still early on."
That means the digital wallet ideal — one where a consumer's phone completely substitutes the leather in his pocket — is seemingly in the distant future.
Still, the industry has been making baby steps.
Apple is the biggest and most successful proponent of digital commerce so far with its de-facto mobile wallet Passbook, says Philiou. Behind the tech giant's win is the reach of its iPhone, which has millions of users.
"I just started interacting with it, and now I use it for travel every week," Philliou says, adding that it provides utility that others have not.
Some of the other attempts at a digital wallet have been solely used for online purchases, says Matthew Harris, a managing director of Bain Capital Ventures.
He says wallets that rely on physical transactions at the counter haven't had as much consumer adoption.
"You have to split [digital wallets] between digital card present [at the counter] and card not present [used solely for ecommerce]," says Harris, adding that he puts Google Wallet and American Express' digital wallet Serve into a different class than those that operate purely online. "At this point, no one is having success with digital wallets at the point of sale."
He points to Braintree's summertime acquisition of Venmo, which recently yielded the e-commerce facilitator's "one-click" mobile shopping system.
The method gives users the chance to enter their payment information once, and then shop online with more than 4,000 participating internet sellers.
"So the key to what makes a digital wallet, from my perspective, is being multi-merchant and the Braintree, Venmo solution" does that, says Harris.
Indeed, incumbents seem to be playing catch-up to non-traditional players that have been aggressively laying the groundwork for the eventual mobile wallet war.
For instance, PayPal is leveraging Discover's payment network in order to push further into the real world. eBay's e-commerce arm announced its plans this fall and is soon to extend its brand of digital payments to all the retailers that accept Discover's cards. People can, of course, fund their PayPal accounts with multiple different payment options. And, for the first time, merchants are creating digital rewards cards that can be redeemed through a customer's smartphone. Starbucks is leading a pack of retailers that are now making plans to create a digital-wallet-driven payments network that could eventually work with issuing banks.
That doesn't mean the card networks are just sitting back.
Recently, Samsung and Visa said they are working together to develop a brand of contactless mobile payments that will work on Samsung phones.
The plan, announced in February, is to make Visa's PayWave mobile app a standard on Samsung's NFC-enabled smartphones.
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