Digital Money in Retail –3 years on, where are the digital wallets now?–Blog 1

In mid 2011 we saw the launch/announcements regarding digital wallets from Google, Visa, MasterCard, American Express and many more. Would this mean the end of PayPal’s 10 year domination of this space? 3 years down the line let’s take a look at how these digital wallets fared.

 

In Mid-2011, led by Google Wallet, digital wallets became the new kid on the block. Shift Thought defines these as customer accounts that can hold stored value and allow users to make electronic commerce transactions.

It was recently reported that Google has no intention of giving up on its slow-growing wallet service or mobile payments, and amusingly it was reported “We have been doing this for a while ..And we’ll continue to keep doing this for a long while.”. By “this” I am sure they do not mean growing the wallet slowly. This piqued my curiosity. Where are the digital wallets now? What are the gains and losses?

In March 2014 Eat24, a restaurant delivery app which integrated with Google end November 2013, reported customers spend an average of 11% more when paying with Google Wallet. Subway was one of the first to accept the Google Wallet, offering the option in 5 markets since 2011. Jack in the Box also started testing Google Wallet in 35 of its restaurants in the Los Angeles and San Francisco markets in November 2011.

Now Google is reportedly changing the way they support contactless payments on the newest versions of Androids. This seems a good time to share our research on how each of the different digital wallets announced in mid-2011 have fared since then.

I’d like to share a bit about the landscape at the time when they launched, as a backdrop for discussing how this has changed, and the main initiatives we see today. In 2011, I created the figure below to explain in one page what the Digital Money ecosystem looked like then.

There were 7 billion consumers making payments in the world at the time, which included payments between each other (P2P), to and from governments (P2G/G2P) and corporates (P2B/B2P). The figure shows the main industries and players that supported such payments.

In that year banks and money transfer operators were joined by new entrants to create a vastly different competitive market for payments. Alipay and Paypal led the world at the time, but expectations were high for the new Google wallet which offered a business model based on ‘Google Offers’, a targeted sales mechanism that sent promotions to smartphones. This was a scheme by which consumers and merchants benefited, but it raised concerns about personal data.

In the next blog posts I will look in more detail at each of the industries in this figure to see how they have moved on since 2011.