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Walmart said last week that it anticipates its mobile app may be close to surpassing third-party app Apple Pay for mobile payments usage in the US. Of course, no one knows with certainty which is bigger given that neither Walmart nor Apple release user nor payment volume numbers publicly. Ultimately, it does not matter which might be more popular because they are in different races.
Walmart is a merchant-branded mobile app that wins by becoming heavily integrated as the go-to wallet for its key consumers. A third-party app like Apple Pay wins by gaining acceptance across a breath of merchants, verticals and countries. In the world of physical card payments, it is the equivalent of arguing that a popular store card has a brighter future than a card product that can be used across a wider ecosystem.
Yes, it was a blow when the world’s largest retailer snubbed Apple Pay. However, it is important to remember that while Walmart may be one of the biggest purveyors of goods, it is not the only place that consumers spend money. Walmart’s total US revenue will account for less than 5% of consumer payments in 2017, according to estimates from Euromonitor International.
Walmart made the decision to go it alone and control its own destiny when it introduced Walmart Pay in December 2015. Walmart routinely promoted its new app in stores and online to drive consumer adoption. It ultimately found success with its mobile payments app for many of the same reasons mobile payments posterchild Starbucks first did – both tapped into the consumer desire to save time and money.
In the case of Walmart Pay, consumers can access in-store offers, promotions, rewards and gift card balances all in one place. A consumer can scan Walmart Pay at any time during the checkout, eliminating the traditional lull of waiting to complete a payment transaction until after a cashier has completed scanning all items. Additional mobile app upgrades added features that reduce time spent waiting in line for money services or prescription refills by allowing some of the paperwork to be completed ahead of time through the app.
Starbucks used a similar formula. When it came to market in 2011 with its first mobile payment app, Starbucks linked it to the company’s already popular loyalty program to give its most loyal and frequent clientele a compelling reason to try it out. About a third of transactions in US stores are now made through the app, according to the company’s third-quarter earnings call. In late 2014, it followed up with the Mobile Order and Pay feature, which lets customers order with their smartphone via Starbucks’ app to save time and skip the line. This feature, which now accounts for 10% of transactions, was so popular that it caused operational headaches as caffeine addicts awaiting their food and beverages created congestion in some outlets.
Although these two have found success with their own mobile payments apps that does not mean that every merchant brand should prioritize doing so. There is limited real estate on a consumer’s mobile phone so only the most popular brands with a loyalty-driven, high-frequency usage are likely to gain a footing. That is why mobile payments apps with the potential for greater ubiquity have a bright future. Simply put, it is unlikely consumers will ever be able to use Walmart Pay to pay for a mass transit ride, a tank of gas or dining out. By the very nature of what they can offer, mobile payment providers like Apple can dream bigger than a merchant.
After years of speculation and numerous rumors, Apple made its entry into mobile payments official in late 2014. For a still-fledging industry, the entrance of a brand with a proven track record of changing consumer behavior across industries gave the mobile payments concept a much-needed boost, and along the way ushered in the “era of pay”. Samsung Pay, Android Pay and others like Walmart Pay would later follow.
All the mobile wallets launched by tech titans like Alphabet, Apple and Samsung have the potential to one day build a global mobile payments network. There are similarities among the mobile wallets offered by this tech titan trio – namely all rely heavily on partnerships with existing financial institutions and leverage NFC to execute tap-and-go payments. That means they are likely to find the greatest success where the card payment infrastructure, especially contactless card payments, is most established.
The vision that Apple’s founder Steve Jobs once had of a new mobile phone becoming so instrumental and integrated into people’s lives that consumers would rather leave their wallet at home than their mobile phone is starting to take shape. Apple recently reported that its active users have more than doubled, and annual transactions are up 330%, according to its recent fourth quarter earnings call.
Widespread adoption of Apple Pay-like wallets is what would signal a true consumer shift. That is because seeing consumers routinely leveraging such a mobile wallet would mean proximity payments have been integrated into their everyday lives. As of today, the success stories shared by Starbucks and Walmart are isolated advancements of a still nascent industry. Euromonitor International estimates that proximity payments in the US, specifically, will grow at a 67% compound annual growth rate from 2016 to 2021, adding US$ 443.5 billion in new digital spend.
