Who will win the battle: In-app payments or mobile wallets?

  • Rob Fernandes, Product & Strategy Director, PayPoint Mobile and Online

  • 25.06.2015 08:00 pm

For a technology still searching for dominance, wallets have come an awful long way. It wasn’t actually long after the birth of the internet, that the notion of a digital wallet, where consumers store and spend money online, emerged. Many forget that the pioneer electronic wallets of the mid-nineties were desktop software.  And since PayPal launched and Amazon patented stored-card, one-click payments, our biggest technology companies have tried to innovate by finding new ways to optimise offline payment mechanisms for a digital world.

Following almost two decades of innovation, large players are still trying to figure out a truly game-changing use case. In announcing its’ new native Android payment mechanism, Google effectively side-lined its’ long-suffering Wallet product to be a peer to peer money transfer service for niche uses allowing Gmail users to send money to one another. Just last summer Amazon piloted its own in-store wallet app, only to withdraw the service six months after launch. Meanwhile, two payments heavyweights, Visa and MasterCard, still labour in unproven territory with early iterations of their V.me and MasterPass wallets.

By comparison, in-app payments have been a resounding success, serving clear use cases and growing as fast as the proliferation of smartphones and tablets themselves. So can the branded electronic wallets of the past 20 years ever find a competitive angle?

I’m not convinced. Even with big brand support, Softcard, a joint venture of leading US telcos (once known, somewhat unfortunately, as ISIS) no longer exists. Its UK counterpart, Weve, has gone a similar way. And now Google Wallet has taken its’ sideways step out of digital commerce. Even the pioneer of all wallet apps, PayPal, is more of a conventional payments provider these days. What the developers behind these products have discovered is that consumers don’t want to keep installing ‘yet another app’ to pay for things. Simply replicating two decades of digital wallet thinking in a mobile device doesn’t add additional benefit to the customer. It’s an extra step that most of us, quite frankly, just can’t be bothered to take.

For this generation, the m-commerce success stories are not in retail, but services – such as car parking, taxi rides, and food delivery. With more dynamic and often time-critical pricing than shopping, the actual amount paid, and when, will vary enormously based on a whole range of factors. And when money changes hands, the ability to execute transactions instantly and invisibly, and for consumers to share cost with friends, defer payment or pay with a different funding source, will matter even more. That’s a big step up from the derivative use cases of those repeated attempts at a branded digital wallet.

Indeed the best examples of mobile payment consistently avoid generic, open-loop wallets. Starbucks has had well documented digital success in retail coffee shops, HungryHouse and JustEat are rapidly transforming the humble takeaway meal, whilst Uber and Hailo, who make getting a taxi much easier, have also reached critical mass. Our own parking app PayByPhone enables customers to pay for and manage parking on their mobile without the stress of worrying about whether they have enough small change for the parking meter or having to return to their car before a session expires.

The so-called mobile wallet wars era, resembles something like a playground squabble compared to the runaway success of in-app payments. The secret, of course, is these apps integrate payments, often invisibly, in the use case itself, to create truly original propositions. All of a sudden daily transactions and tasks become easy and convenient from start to finish for consumers, whilst for merchants, brand consistency is maintained throughout.

With Apple Pay heading to the UK imminently, it too has read the script. Though popularised as an in-store payment mechanic using NFC, the simplification of authorising a transaction extends into apps too. And with Apple’s established brand and focus on user experience, it could be the first digital wallet that doesn’t need to be an in-your-face intermediary – it can exist solely to provide consumers with convenience. Developers in the Apple ecosystem will build it into all sorts of app uses, and this innovation will make it perhaps the first digital wallet to succeed.

But on the whole it is hard to see generic wallets replicating the impact of in-app payments. If the past decade has taught us anything, it’s that innovators are those who don’t try to just replicate old paradigms in new technology, but are finding fresh ways to drive convenience from the possibilities digital technologies offer. In light of this, it is hard to view most wallets – regardless of the organisations backing them – as anything other than an unnecessary ‘additional’ step. For now, in-app payments are leading the way by providing customers with advanced capabilities and a seamless payments experience.

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