Mobile Wallets, Despite Criticisms, May Be Getting Ready for Their Close-up

The idea of the “mobile wallet” is becoming a popular one, as least as far as the technology press is concerned. Both merchants and consumers – particularly younger and more tech-savvy ones – are finding that in the digital mobile age, the ability to accept debit and credit cards through an app on consumer’s iOS or Android (News - Alert) smartphones or tablets is a smart one. The marketplace for mobile wallets, once a cutting-edge idea, is becoming rather crowded, although most studies indicate that market penetration is still quite small.

Some of the barriers to mobile wallets include security concerns and the fact that most consumers still don’t see the value in the prospect, particularly when they find that different merchants are embracing different mobile wallet solutions, which seems to imply that to fully embrace the technology, consumers would have to download multiple apps for each merchant they do business with.

Analysts believe that the proliferation of mobile wallet solutions will not last. As a small core of companies such as PayPal (News - Alert), Square and Google Wallet become more prevalent, smaller companies and banks that offer such solutions are likely to merge through acquisitions, leaving only a few key players in the market. This may help consumers who are looking for “one mobile wallet to rule them all.”

While PayPal tends to focus more on person-to-person payments, Square has sought to push into the retail marketplace for mobile payments. Since each company uses proprietary technology, they each have fans and detractors. Some high-profile hackings of Google (News - Alert) Wallet last year has raised security questions, particularly after a review by tech forensics firm viaForensics found that some card information stored by Google Wallet could be accessed outside the app. Square, which is well placed to rule the market, has also been anecdotally linked to security problems. The San Francisco-based company also earned the ire of some last year when it announced it would no longer allow gun transactions using its devices or software. Amazon Payments is also a service to watch, given how the company rules the e-commerce marketplace.

For the few mobile payment systems left standing after the predicted wave of acquisitions, technological innovation will determine which player comes out on top.

“The eventual four or five mainstream mobile wallet offerings will effectively become repositories for the customer's payment habits, containing payment cards, account histories, loyalty programs, couponing services and real-time promotions,” wrote Joseph Frisz for Mobile Payment Today late last year. “For the most part, these mainstream solutions will be technology agnostic, incorporating several payment-enabling technologies such as near field communications, QR codes, Bluetooth Low Energy and others.”

So despite low penetration today, once marketplace confusion lessens and several large companies take a commanding lead, consumers will probably become more comfortable with the technology and view its convenience as a bonus.