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A competitive market for interoperable mobile wallets - Latest SPA Paper - March 2015

Smart payment association - article blog


In recent years we’ve seen the emergence of a ‘Mobile Wallet war’ with Google Wallet, SOFTCARD, MCX, Visa’s Wallet, MasterCard, MasterPass, Apple Passbook, PayPal, American Express’ Serve products – and most recently Apple Pay – all making a play to dominate the market, capture consumer hearts and minds, and garner widespread retailer acceptance. The battlefield expanded last year with the 2014 launch of Apple Pay. And coming right up to date, February 2015 was a big month for wallets...


Mobile Wallets constitute a good example of the way innovation is becoming a focal point for payment system development and enhanced competition. Providing banks and other institutions with a broad range of strategic options for gaining market share, Mobile Wallets make it possible for organizations to join forces and issue cobranded wallets. These options include: a proprietary wallet connected to a proprietary platform developed using an organization’s own research and development; joint ventures; venture capital investment; and alliances to develop a proprietary or public ISO standard.


Each strategic option carries its own costs and benefits. However, as technology vendors, the SPA membership is concerned that a “wallet war” may result in excessive market fragmentation. We’ve already seen the lines of engagement being draw. Currently the market is populated by Google Wallet, SOFTCARD, MCX, Visa's Wallet, MasterCard's MasterPass, Apple Passbook, PayPal and American Express' Serve. The battlefield expanded last year with the 2014 launch of Apple Pay, and more recently through Samsung’s February 2015 acquisition of LoopPay.


This diverse set of wallet technology offerings will continue to co-exist until users decide which business model will dominate the market. However, the already high level of fragmentation raises the question as to whether an industry-led standard that contains a security framework and is flexible enough to accommodate different business models could boost adoption of the Mobile Wallet.


This paper discusses the nature and expected functionalities of the ideal Mobile Wallet. With respect to terminology, digital wallet’ is sometimes used to refer to a wallet stored in the Cloud; this paper does not differentiate between Mobile Wallets and Digital Wallets. The object of this paper is not to discuss access methods to the Wallet ie. NFC, HCE.


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