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LevelUp, Starbucks, PayPal, Square are early front-runners in mobile payments: report

In an evaluation of mobile wallets across several sectors, LevelUp, Starbucks and MasterCard’s PayPass were the leaders, according to a new report from Carlisle & Gallagher Consulting Group.

For the Mobile Wallet Market Analysis report, Carlisle & Gallagher evaluated 20 mobile wallets from financial institutions, merchants, technology companies and card associations based on payment capabilities such as how widely they are accepted as well as user experience. LevelUp was pinpointed as a front-runner because it is easy set-up, easy-to-use, offers the ability to tie rewards to payments as well as to attach a credit or debit card and is accepted at over 3,800 participating retailers.

“The differentiation around mobile wallets is going to be around the suite of functional and additional enhancements they bring to the party,” said Peter Olynick, card and payments practice leader at Carlisle & Gallagher. “If it is just about replacing plastic cards, this will be compelling for some people but not enough to drive widespread adoption.

“LevelUp, Starbucks, PayPal and Square are really starting to get that early front-runner status,” he said.

“This is the first lap in the marathon – there is a lot more running to happen in this particular race.”

Merchant acceptance
In terms of the other frontrunners, PayPal was singled out because it is easy to set up and use while offering the ability to attach a credit or debit card. Square is also easy to set up and use, can attach a credit or debit card and is accepted at over 200,000 businesses. Starbucks, in addition to being easy, offers enhanced consumer shopping experience with rewards, downloads and eGifts.

Mobile wallets from technology companies benefit from the fact that consumers open to them, they typically lean towards open wallet integration and are easy to use. However, the challenges they face are limited merchant acceptance and low merchant knowledge as well as inconsistent payment experiences.

Within the technology category, the report ranks LevelUp as number one, Square number two and PayPal number three. Google Wallet came in fourth place because of limited NFC acceptance and compatibility. Apple Passbook, which has limited payment capabilities, and Isis, which has limited availability, followed.

In the merchants category, Starbucks comes in first place for its rich functionality, followed by Amazon, which is available only online. In third place among merchants is Dunkin Donuts, which does not offer a rewards function followed by Target, which takes a loyalty based approach, and Walmart, which lacks mobile payment.

Merchants’ mobile wallets benefit from a deep knowledge of consumer shopping habits, loyal customer bases and ties to rewards and promotions. However, these wallets are limited to an individual merchant, with growth likely to be inhibited by open wallet offerings.

Wallet of the future
Among financial card associations, MasterCard’s PayPass comes in first place with a limited but emerging merchant footprint, followed by Visa’s V.Me, which is online only at this point and Amex Serve.

Card associations benefit from brand awareness and loyalty as well as the fact that their mobile wallets tend to be easy to set-up and lean toward multiple payment integrations. On the negative side, they offer limited transaction capabilities and do not offer publicly available POS capabilities.

The mobile wallet offerings from five leading U.S. banks all had similar scores based on limited payment and shopping capabilities.

In general, while financial institutions have large customer bases and are trusted by consumers, their mobile wallet offerings are limited by POS capabilities that are not publicly available and by offering closed wallets that have a traditional look and feel.

The findings suggest that the mobile wallet of the future will accept multiple cards from multiple financial institutions offer a full range of capabilities and will be able to work with multiple technologies, including NFC, QR codes and cloud.

“I, as a consumer, should not have to worry about which technology the merchant has chosen,” Mr. Olynick said. “The technology should not prevent the transaction.”

“In the short-term and intermediate term, there is not going to be one technology that wins over consumers or wins the mobile wallet race – it is going to be about the ones that see high levels of adoption with additional functionality while mitigating concerns about privacy and identity theft,” he said.

Final Take
Chantal Tode is associate editor on Mobile Commerce Daily, New York