Mobile wallet analysis: Evolution, Challenges and the Way Ahead

Multiple industry sources estimate that the mobile payment market will grow to a trillion dollars in the next five years.

Mobile wallet evolution:

Source: LTP research and analysis

Mobile wallet concepts began in 2000. With growing penetration of smart phones across the US, certain players starting looking at replacing plastic cards with always-on, ubiquitous mobile devices. We see that the industry has evolved into its current state along three noticeable phases.

Phase I: Inception/Ideation (Before 2010)

Early on, nobody was excited about mobile wallets. Early adopters included desktop based SAAS products and mobile apps were considered enabling technologies. From a consumer perspective purchase options were limited to a few major retailers (like Starbucks).Users had to manually enter information and most mobile wallets were company branded with few white label options.

Phase II: Exploration (2010-12)

In 2010, multiple start-ups and large companies jumped into the game, testingcombinations of enabling technology, loading options and product strategies to drive customer adoption. Players became more aggressive about merchant acquisition. NFC’s QR codes were the major enabling technologies used for making m-wallet products. For NFC, the additional cost of hardware and availability remained a challenge. The emergence of white label solutions such as SeQR, Paydiant and others spurred adoptionwith retailers, but adoption was still in its infancy.

Phase III: Early acceptance (2012 onwards)

Mobile wallets became popular in Silicon Valley and NY alley with more than 100 players now participating in the US m-wallet industry. With the launch of Google wallet, ISIS and PayPal, the m-wallet market seemed to be on the brink of success. Though the ISIS numbers have not been encouraging since launch, the market is slowly expected to pick up Omni-channel wallet options are allowing stronger acceptance at retailers. Additionally, merchants have realized the potential of m-wallets and a handful of large merchants like Wal-Mart, K-mart, Kohl’s, Sears,have launched their own MCX wallet.


There are more than 100 mobile wallet companies operating in the US alone, but the low adoption among consumers and acceptance infrastructure at merchants is creating a hurdle for the growth of mobile wallets.

Source: LTP research and analysis

Perceived security threat and lack of privacy over mobile payments is considered to major factor inhibiting the m-wallet adoption. At the same time, lack of rules governing mobile payments transaction makes consumer more cautious making such payments. Many major mobile phones manufacturers are yet to adopt the proximity technology like NFC for payments. Apple is one of such major manufacturer in US. Apart from technology and security perspectives, the consumers currently do not see a strong incentive in form of making their world wallet free, without a scope of integrating multiple loyalty, rewards and payment cards into one.

On the other hand, additional cost for NFC POS is major hindrance for merchant adoption. With no technology emerging as clear winner, retailers are playing wait-n-watch game resulting in less than expected adoption. Mobile wallets need to integrate with retailers existing CRM to have more tooth and drive strong adoption.

Players to watch out for:

With m-wallets in early acceptance phase, it is difficult to predict the winners. But somebody has got to do it for the benefit of the merchants as well as consumer adoption. We have been working on an evaluation framework with several parameters across 4 categories (Merchant Acceptance, Solution Cost and Functionality, User Adoption, Brand and Future Potential) to identify winners among the 75 serious m-wallet players in the US. As a part of this article series, we would discuss the framework and results in the subsequent articles. Please follow this space for Mobile Wallet Evaluation Framework. This will be an ongoing effort and the results will be updated based on market dynamics every quarter. Many experts in the US market are going through it for cross-validation. If you want to contribute to the rankings as an expert, or participate as a company please write to us through the contact form

Also Read Part 2 Mobile Wallet Analysis (Part 2)