Posted by Bethany Frank on 17 May 2017
Mobile payments took center stage in 2016 as market leaders in financial services, retail, and technology raced to develop their own platforms; yet despite all the options emerging, consumers have been slow to start using mobile wallets.
For companies like Apple and Samsung, gaining merchant acceptance has been a struggle, contributing to lower-than-expected adoption rates. Many of the biggest names in retail are more interested in offering their own mobile wallet platforms in an effort to build customer loyalty, following the Starbucks model of a payment app that is also a rewards program. This is a challenge for some mobile wallet providers, but a benefit for a merchant like Amazon that can rely on its existing customer base to change their checkout habits.
Many retailers are also members of a consortium known as the Merchant Customer Exchange (MCX). MCX initially sought to establish a merchant-owned mobile payments platform to compete with the likes of Apple Pay and others but shut down its flagship mobile payment platform in 2016 after a string of challenges and controversies.
MCX’s failure turned out to be a lucrative opportunity for JP Morgan Chase to become a dominant force in the mobile payments market. Following the shutdown of Current-C, the MCX platform, Chase managed to strike an exclusive deal with the consortium, making Chase Pay the only digital wallet currently accepted by some member merchants. Chase has also agreed to purchase the technology behind Current-C from MCX.
Chase struck another exclusive deal with Visa that allows it to essentially rent a part of Visa’s transaction processing network. The closed-loop network allows Chase to implement its own flat-rate fee structure, potentially adding up to significant savings for merchants and giving Chase Pay another major advantage over competitors in the retail market.
In October 2016, MasterCard announced the integration of Masterpass with Android Pay, Samsung Pay, and other mobile wallets. This integration allows consumers to make payments anywhere Masterpass is accepted, making it easier for merchants to accept payments online.
The road to mobile payments adoption has been bumpy, but these platforms are likely to gain steam as we head into the next decade. Consumer adoption would likely increase if merchants take a more aggressive stance in accepting and promoting the use of mobile wallets. The opposite could also hold true, as merchants are more likely to cooperate if a market-leader like Amazon figures out how to drive a massive shift in consumer behavior. Be sure to check back to our blog as we continue to cover what’s going on in the mobile payments space, and read more about the latest payments innovations and trends here.
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