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MAG Board Corner: Mobile Wallets - Where are we now? (MAG Quarterly- Volume Five, Issue Two)

Bryan Penny Headshot
By Bryan Penny, VP Payments and New Markets, Nordstrom

June 1, 2017

With digital as the focus of this quarter’s newsletter, the big elephant in the room is “why aren’t we all paying with mobile wallets now?” 

This year at Coachella Valley’s Music & Arts Festival, concert-goers only needed to have their phones on them if they wanted to buy something. How did they pull this off? As a requirement to work the festival, every vendor simply needed to accept Near Field Communication (NFC) payments. How long will it be until the rest of the world’s merchants choose to go digital too?

There are many factors included in answering this question, but here are some of the major challenges mainstream merchants are facing in today’s ever-changing world of digital payments.

1. Enabling a digital wallet is not a turnkey project.

As much as the digital wallet community wants to say it’s easy to adopt their solution, the reality is it is typically much more complex. Standard questions most merchants have to ask when approached by a new digital wallet provider:

  • How much work will it take to integrate with our Private Label/Co-Brand cards?
  • How will our loyalty and gift card systems work with this?
  • How will we identify our customers that pay with this?
  • Does my processor have to make changes to accept this?
  • How will I roll this out and train my staff?
  • How do I ensure a seamless returns and order adjustment experience for these customers?

Yes, the acceptance of a new digital wallet is not terribly difficult, but merchants are recognizing that the simple, out-of-the-box solution isn’t really what will help their business grow. As merchants have started to understand the true scope of work needed to create a meaningful experience, the return on investment begins to diminish.

2. There is no one-stop-shop solution for Omni-channel digital wallets.

Very few of the digital wallet solutions are meeting the all the needs of merchants both online and in-store. Apple Pay can only be used with certain iOS devices or Safari-based browsers and Samsung Pay is tied to Samsung-phones, and the list goes on. As merchants are being tasked with providing seamless Omni-channel solutions for their customers, patching together multiple digital wallet solutions in order to appease all of your customers becomes an insurmountable task. Online, this creates what has been commonly-referred to as “the NASCAR effect” for checkout pages, where conversion rate has actually dropped because customers are confronted with so many different buttons to choose from.

In-store, the “honor all wallets” rule makes life just as difficult for merchants. perspective this becomes exponentially more difficult with the “honor all wallets” rule. With the introduction of digital wallets, the card brands have stated that the “honor all cards” rule also applies to digital wallets. This means that if a merchant chooses to accept one digital wallet that uses an underlying 3rd party credit product, they are then required to accept all similar wallets. For merchants, the level of effort associated with accepting one digital wallet (e.g. Apple Pay), is exponentially greater given the ever-growing number of digital wallets that exist in the industry (Samsung Pay, Android Pay, etc.). As new products come to market (both good and bad), merchants have no way to prevent their use before appropriately testing to ensure their customers have the best experience possible.

3. The majority of in-store merchants are still focused on finishing EMV.

According to the March 2017 Visa reports, only 49% of Visa’s total payment volume was done at an EMV location. That means half of all merchants in the industry are either in the middle of, or planning on doing in the near future, a major EMV implementation. While many digital wallet providers pushed hard for merchants to adopt their payment as part of EMV, the consensus from the merchant community was that EMV was complex enough, and they were unwilling to add more to their plates. Piling on digital wallet training to an already-confused staff trying to help customers insert vs. swipe cards was not a hurdle the digital wallet providers saw coming as they looked to get buy-in from major merchants. For merchants that have adopted EMV, they have likely just finished paying for EMV and now have to get back in line with the rest of the enterprise to get additional funding for digital wallet work.

4. The in-store business case just doesn’t add up.

Faster checkout lines? That’s the answer many of us hear from proponents of NFC, especially as Apple Pay was first being introduced in 2014. In reality, none of the digital wallet providers are outwardly sharing results of NFC acceptance like they are with online acceptance, meaning the results must be underwhelming at the very least. The problem comes with the fact that, yes, people hate lines when they are shopping in a store. But pulling out your credit card and inserting it or swiping it is not the source of that frustration. Checkout lines are much more tied to the salesperson’s interaction with the POS system, not necessarily when they give control to the customer for payment. The truth is if a customer intends on using a digital wallet when they get in line, then come to find out the merchant can’t accept it when they get to the register, they simply pull out their card like they always have. Without customers demanding the products in the form of walking out of stores, the business case for implementing NFC in-store just doesn’t add up.

5. Standards aren’t open

The final issue with digital wallets is around the standards that wallets are built are aren’t open and could inhibit competition and innovation.  The standards used by most wallets are both NFC and the tokenization.  Ideally, using open standards for the foundation of digital payments would encourage innovation and competition.   With the current set up, merchants will struggle to work with each of the wallet providers to ensure they are able to support their customer needs.


We are still many years away from a world where card plastic is eliminated completely. That being said, the market for digital payments is still growing, as we are seeing slow but steady growth year-over-year despite lagging consumer adoption.

When considering a new digital payment method, merchants need to fully understand the value they expect it to drive, along with the true amount of work needed to deliver on that value, before making the decision to move forward.

As an industry, it is in all of our best interests as providers, networks, banks, and merchants to work together to develop a set of minimum open standards needed for a digital wallet to be launched in the marketplace and monitored for compliance. This will significantly decrease the amount of work needed for merchants on the acceptance side, while at the same time ensuring customers have a base-level set of features they can come to expect when using a digital payment method.

As the MAG continues to monitor the landscape in this area, there are two key committees that need merchant input; Digital Commerce Task Force & The Operations Committee. If you are interested in volunteering, please contact Laura Townsend at