Despite all of the hype around mobile money at the beginning of 2013, your leather wallet will live to see another year. The blending of the physical and digital worlds at the point-of-sale has proven to be much clunkier than first imagined. It’s difficult to say whether the m-wallets of the future will be a consortium of store-branded apps or just a handful of broader third-party apps that address multiple spend categories and payment types (proximity pay, P2P, etc). However, certain attributes of consumer spend may offer clues.
This just in: consumers simply aren’t interested in maintaining an extra app on their phone that is used for the occasional round of golf or pair of new shoes (would you want to carry a separate wallet for the haircut that you get only once a month?). With that said, high-dollar-value expenditures like rent and auto insurance play limited roles in the wallet wars. Not only are these payments infrequent but they are typically directed to counterparties that don’t accept payment at a physical point-of-sale.
It’s important to note that monthly transaction volume will differ amongst consumer segments and sub-categories. For example, a suburban consumer might fill up her car twice each month in contrast to the everyday urban cab ride. Similarly, transaction volume can vary greatly from month to month for a given consumer. And finally, transaction volume may not be indicative of the wallet’s actual usage at the point-of-interaction. The monthly purchase of a train pass may actually yield 30 scans of a mobile wallet as a rider validates his initial purchase of the pass during each ride.
It should come as no surprise that the category of spend that tends to exhibit the highest transaction volumes across consumer segments is food and dining. Though food and dining transaction volume will be relatively lower for the discipline grocery shopper that dines out only once or twice a month, other consumers have exceptional fast food loyalty that can produce three-figure transaction counts for a given month. Suddenly it makes sense why QSRs like Starbucks are the only businesses with material wallet adoption rates.
After food and dining, the spend categories with the highest transaction volumes are transit, shopping and personal care. Interestingly enough, transit has seen even greater mobile wallet adoption than food and dining outside of the U.S. Transaction volume, of course, is only one of several factors expected to dictate the winner(s) of the ‘wallet wars’. Much has been made of an enhanced user experience, relating to the many loyalty and engagement use cases that certain spend categories possess.
Other factors, such as the level of purchase itemization, volume of cross-category spend and amount of supplemental purchase information (i.e. gallons of fuel consumed, price per gallon, etc), are also expected to play a role in which wallets ultimately gain popularity amongst consumers. Right now, third party providers like PayPal, Square, Dwolla, ISIS and Google have done very little to drive consumer interest.
The Rub: Mobile wallets that cater to high-volume spend categories like food and dining are likely to resonate well with the increasingly app-selective consumer base