Can Retailers Win the Mobile Payments War?

Prior to October 2012, there was a frenzy of speculation on how quickly the NFC mobile payments model would displace magstripe cards. NFC would provide a level playing field, allowing all retailers to accept all solutions, and those solutions would most-likely take the form of a mobile wallet that held all a consumer's payment card data - allowing the consumer to leave their physical wallet at home.

Then Apple did the unexpected: the iPhone 5 didn't have NFC. In fact, a senior Apple executive said at the time: "It's not clear that NFC is the solution to any current problem". Since 40-50% of smartphone users opt for Apple, this reduced the market for NFC-based mobile wallets overnight. In frustration, Google is even considering a mag-stripe card to access Google Wallet.

With a time-out from the hype, we can speculate on the pace and form mobile POS payments might actually take and what it all means for banks. Our hypothesis is that mobile POS payments are more likely to end up retailer-centric rather than wallet-centric. It is based on observations on two key retailers: Starbucks and Wal-Mart.

This two-part white paper speculates on where mobile POS payments are headed. The first part addresses whether open wallets or retailer-specific apps will win over the consumer. Part two covers how retailer-centric mobile payments might impact card issuers.