Many companies are now pouring large amounts of resources into the development of mobile wallet technologies and platforms, and the reason why has little to do with maximizing profits from payment processing.
Mobile wallet developers like Google and Isis may have once considered getting into the payment processing industry as a means of making money off these new types of purchases, but both abandoned the ideas in favor of a different one, according to a report from the tech news site CNET. Instead of being involved in payment processing, mobile wallet companies may instead be trying to earn profits from allowing retailers to have greater access to consumer information.
Consumer data is likely to be the most profitable thing for mobile wallet developers, who will be able to cull massive amounts of information on customer spending and turn that into information that can then be used by merchants, the report said. For instance, Starbucks now has a mobile app that links to a customer's store loyalty rewards account. Customers using that app to make a purchase gives the coffee chain data on not only where and when a purchase was made, but also what that purchase was for. That, in turn, allows the company to push more offers and coupons directly to that user's smartphone, which in turn could lead to more repeat business.
The same concept could be applied across a number of channels, the report said. Further, if mobile wallet companies allow consumers to load whatever coupons they receive from merchants directly into the app, and then have those savings taken out automatically when making a purchase, that could be a major boon. Experts say one of the largest hurdles in mobile wallet adoption is that consumers simply do not take on new technologies unless they can prove to be more secure or convenient than those they already use.
"I can give you a better way to pay," Jaymee Johnson, director of marketing for Isis, recently told the tech site. "But that's not broken. It's not too taxing to pull out a plastic credit card from your wallet. But what mobile payments also give you is a way to manage your loyalty cards and your financial life."
Further, it's believed that linking coupons to mobile wallets could add some power for the latter because the former has grown rather popular in the last few years, the report said. Recent data from the Retail Gazette shows that about 58 percent of consumers now use coupons in their everyday lives, and that number is up about 40 percent in the last four years alone. Therefore, giving consumers the option to use the one in conjunction with the other, automatically, could lead to widespread adoption becoming reality more quickly.
Data shows that mobile wallet purchases could be of significant value within just the next few years. Some estimates have the industry being worth as much as $670 billion worldwide by the end of 2015, and others show the market in the U.S. alone could climb to a value of $31 billion by 2016. As such, many retailers, including Best Buy, Target, Wal-Mart and more are working in concert to develop a kind of mobile payments app, and other companies are testing the waters as well.
Mobile wallet technology is said to be far more secure than traditional credit card use because of the way in which it encrypts and protects payment data both at the time of a purchase and when the system is not in use.