Digital wallet competition heats up

Global payments provider MasterCard announced last week that its digital wallet service MasterPass is set to be rolled out in the UK, increasing the competition in this innovative part of the mobile commerce space.

Mark McMurtrie from The Payments Consultancy said that the arrival of this new mobile payments service, which is being embraced by retailers such as Argos, Boots, House of Fraser and The Hut Group, suggests we can a expect to see a "big battle between leading global brands" to become consumers' preferred digital identity provider.

Welcoming the arrival of MasterPass, McMurtrie warned that there will be competitive pressure in the form of other card networks, banks, internet heavyweights, multinational retailers and mobile operators, all of which already have or shortly will be launching digital wallets.

"A key question is how many digital wallets will a consumer be prepared to have?" McMurtrie told Essential Retail. "Who will they place their trust in? There is much to play for as the chosen wallet provider will have significant influence on the choice of payment card selected."

Last month, global mobile operators association GSMA held an event in which plans for a new mobile wallet loyalty system were announced. The group behind the initiative, Weve, is a partnership between mobile operators EE, Telefonica UK and Vodafone, and the target is to launch in the UK next year in association with a number of leading retailers and service providers.

For many years now there has been talk of a mobile payments 'tipping point', and after much debate and the continued increase in the adoption of smartphone devices it seems like platforms to support this technological evolution are being put in place.

MasterPass itself is a digital service allowing consumers to use any payment card or enabled device to make transactions with just a click, tap or touch, depending on whether they are online, in-store or on the move. Consumers store all their payment, store card, loyalty, shipping and billing address details in one place, effectively creating a centralised system for the modern, tech-savvy shopper.

It is the evolution of PayPass Wallet Services, which was initially announced last year and has since been trialled with select merchants and issuers. Consumers in Australia, Canada and the US have previously had access to the service, and there are plans to expand it to Belgium, Brazil, China, France, Italy, the Netherlands, Singapore, Spain and Sweden later in 2013.

MBNA has been confirmed as one of the first issuers on the MasterPass platform in the UK, while Mastercard lists its technology partners as Credit Call, DataCash,, MoPowered, Optimal Payments, Pensio, Sage Pay, Secure Trading, The Logic Group, Usablenet and WorldPay.

"Like all new card technologies it will take time before wide-scale adoption by retail merchants and consumers and so we will need to be patient," explained McMurtrie.

"There are many competing initiatives, implementation challenges and commercial negotiations to be concluded. MasterPass usage in-store will rely on the rollout of contactless acceptance infrastructure and – seven years on – we are only now starting to see that happening in the UK."

The British Retail Consortium (BRC) recently published some research into payments in the UK, which highlighted the changing habits of consumer. The Cost of Payment Collection Survey indicated that 54.4% of transactions were still paid in cash in 2012, but the number of these transactions dropped by 6.7% year on year and and money spent was down 9.7%.

Debit card payments were up, while alternative payment methods more than doubled compared to 2011 and now account for 5% of all transactions.

Helen Dickinson, Director General of the BRC, commented: "Cash is still the most popular way to pay, but our survey shows how rapidly alternative and emerging methods are gaining ground, with growth more than doubling on the previous year, albeit from a low base.

"These methods will be the 'ones to watch' in the future, and retailers are investing heavily to make sure their customers have choice and convenience in ways to pay, whether in-store, at home or on the move."

Find out more about MasterCard's MasterPass

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