A 5 Minute Primer on Mobile Payments

Guide to Mobile Payments
Posted in Gift Cards
| December 23, 2015
| by Bryan Wang

Right now, mobile payments account for $50 billion in sales, compared to $2.7 trillion for credit card payments - However, projections by payment processor Worldpay indicate that by 2019 the situation will have reversed.

With that kind of forecast, it’s no wonder that Walmart just launched Walmart Pay. It’s an addition to the store’s mobile app that enables customers to load their credit, debit and Walmart gift cards onto their phones for payment in-store. At checkout, the terminal will generate a QR code that the customer then scans in order to pay. 

Walmart Pay is the latest entry in an already-crowded mobile payments space, but what’s really turned heads is that Walmart opted not to integrate with an existing mobile wallet, nor did it partner with CurrentC (the payment app it had been developing with a coalition of major retailers dubbed the Merchant Consumer Exchange).

Instead, Walmart decided to keep things in-house, and pursue a mobile wallet only usable in their own stores – a closed loop, if you will. This follows on the footsteps of other notable brands that have pioneered a closed loop approach, including Starbucks and Wendy’s.

With so many competing mobile payment options, many businesses are weighing the same decision and trying to decide where to place their bets – so we’ve taken a snapshot of what you need to know about the different mobile payment options as they evolve:


Apple Pay

Works on:
iPhone 6, iPhone 6 Plus, Apple Watch

How it works: 
Consumers link their credit card (from supporting banks) to Apple Pay, and then tap to pay via NFC at any supported terminal (secured via the phone’s fingerprint scanner).

In 30 seconds: 

Back in January, Apple CEO Tim Cook declared 2015, the “year of Apple Pay” and while adoption has steadily grown, only about 15.1% of users with a compatible device have even tried the service, much less made it their primary payment method. Analysts surmise that current methods (pulling out a credit card) are still fast and convenient enough for most people, and that the reach of Apple Pay acceptance with merchants is limited by the slow adoption of NFC terminals. However the upcoming EMV shift is expected to help greatly, as most new terminals being deployed to support EMV also come with NFC capabilities. 


Samsung Pay

Works on: 
Galaxy S6 edge+, Galaxy S6 edge, Galaxy S6 active, Galaxy Note5, Galaxy S6

How it works:
In addition to the NFC tap functionality of other mobile wallets, Samsung Pay is also able to work with non-NFC terminals using a technology called Magnetic Secure Transmission (MST). The phone is able to communicate with the mag stripe reader on a terminal by simply holding the phone above it, however tests have revealed the feature to be finicky at times

In 30 seconds: 
MST opens Samsung Pay up to many more merchants, especially those unwilling to commit to expensive POS and terminal upgrades before mobile takes off. The new technology came from Samsung’s acquisition of a startup called LoopPay earlier this year.


Android Pay

Works on: 
Any Android device with NFC

How it works:
Similar to Apple Pay, users link their credit card from a supporting bank and then pay by tapping their phone on an NFC-enabled terminal.

In 30 seconds: 
Whereas Apple Pay and Samsung Pay are restricted to each brand’s devices, Android Pay avoids this limitation and offers a much larger potential consumer base. 

The service is the much sleeker, tap-and-pay successor to Google Wallet, however Google Wallet will be continuing as a separate app focused on peer-to-peer money transfers.



Works on: 
Android and iOS devices

How it works: 
CurrentC’s goal from the merchant side is to create a mobile payment alternative that avoids the costly interchange fees that credit card processors charge. As a result, CurrentC requires customers to link their bank accounts or private label credit cards instead of integrating with the major credit card providers. Users then pay by opening the app and generating a QR code, which can be read by most standard POS scanners. 

In 30 seconds: 
CurrentC’s appeal to merchants lies in the cost savings from bypassing the credit card networks, its usability without expensive NFC terminal upgrades, and its network of major retailers onboard such as Target and Best Buy. However, CurrentC's appeal to consumers is weaker – as the service requires a tie-in with a personal bank account and has been slow to launch while other options are widely available.  The service’s exclusivity agreements with retailers are also expiring, and many major brands have gone on to accept competing mobile wallets, or have developed their own solutions like Walmart Pay. 


Closed Loop Wallet

Works on: 
Any platform.

How it works: 
A closed-loop wallet gives a brand the most flexibility in terms of deciding which devices and communication methods (NFC, QR code, barcode) they wish to support.

In 30 seconds: 

A closed-loop wallet can give a merchant data on customer behavior and levels of control that an open loop system will not provide. Many brands opt to develop a closed-loop solution so they can work outside the confines of Apple, Google and Samsung’s rigid wallet specifications, as well as gather and manage their own customer data. The drawback of this flexibility is the much higher cost associated with custom development. There is also an option of taking a mixed approach, as Starbucks has done with their own mobile app integrating into aspects of Apple’s passbook and other mobile wallets. 


Network effects will determine the winners in the mobile payments space and many players continue to fight for control. Due to various factors (NFC terminals, fragmented mobile landscape, customer convenience), no one solution has yet managed to reach a critical mass with either retailers or consumers, but 2016 is sure to be a year of fast development in the space. In addition, many merchants are not yet willing to commit to an external provider and going the Walmart / Starbucks route of building their own closed-loop mobile wallets to gain control over their customer data and the user experience.  



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