What you need to know about mo­bile wal­lets

Pay­ment apps are hot. How to know if they’re right for your busi­ness—and if they can strengthen bonds with your cus­tomers


MAYBE YOU’VE SEEN cus­tomers pay for their lat­tes at Star­bucks us­ing that com­pany’s mo­bile wal­let. Or per­haps you’ve seen them breeze through the check­out line at Weg­mans buy­ing their gro­ceries with Ap­ple Pay. As cus­tomers shift from stand­ing in line and swip­ing a credit card to or­der­ing ahead and tap­ping a phone on a scan­ner, mo­bile wal­lets are lead­ing the way. While it’s hard to quan­tify the dol­lar amount trans­acted with mo­bile wal­lets, Parks As­so­ciates es­ti­mates that prox­im­ity pay­ment trans­ac­tions—which re­quire users to tap their phone at a point-of-sale ter­mi­nal—gen­er­ated more than $30 bil­lion in the U.S. in 2016, a fig­ure that’s ex­pected to top $300 bil­lion by 2022. WHAT YOU’LL GET

Fresh & Co., a health­ful grab-and-go café chain in Man­hat­tan, launched its mo­bile wal­let in 2014, and the num­ber of ac­tive users “al­most dou­bles” every year, ac­cord­ing to chief op­er­at­ing of­fi­cer Alex Perez. “The first year, we signed up 8,000, year two was 16,000, and now we’re at 30,000,” he says. This doesn’t sur­prise ob­servers of this pay­ment trend. “Across the board, con­sumer sat­is­fac­tion is about 80 per­cent for mo­bile wal­lets,” says Chris Tweedt, a mo­bile-pay­ments an­a­lyst at Parks As­so­ciates. This is be­cause they are more con­ve­nient than credit cards, and make it eas­ier to man­age loy­alty re­wards.

For busi­ness own­ers with loyal cus­tomers, mo­bile wal­lets—and es­pe­cially the re­wards pro­grams of­ten built into them—can be a pow­er­ful way to strengthen those ties, says Chris Gard­ner, co-founder of mo­bile-wal­let provider Pay­di­ant. One rea­son: They put lo­ca­tion-based sales in­sights and mar­ket­ing cam­paigns within easy reach.

But there’s a sim­pler rea­son to con­sider mo­bile wal­lets: They drive sales. LevelUp pro­vided data to Inc. show­ing that its mer­chants see 7 to 9 per­cent larger tick­ets when their cus­tomers pay with a mo­bile wal­let. Busi­nesses also see an ad­di­tional 9 per­cent spike in av­er­age sales when cus­tomers show up to re­deem loy­alty in­cen­tives. Kari Gi­nal, a vice pres­i­dent of mar­ket­ing for Argo Tea, based in Chicago, claims a re­turn of “two to three times our in­vest­ment” from re­ward re­demp­tions. And your cus­tomers do not need to be phys­i­cally present for your wal­let to bring you ma­jor value. Fas­tachi, a Bos­ton­based gourmet nut com­pany, de­cided to launch its app when founder Souren Etye­mezian tired of cus­tomers “skip­ping us” dur­ing the hol­i­day sea­son when they didn’t have time to wait for their gift to be wrapped. But now, he says, cus­tomers can or­der by phone and get pinged when their pur­chase is ready.


Of­fer­ing a mo­bile wal­let means you’ll be spend­ing money. You’ll need an app, hard­ware, and a pay­ment-pro­cess­ing so­lu­tion if you de­cide to ac­cept mo­bile pay­ments— which Tweedt rec­om­mends, as many shop­pers look for stores that sup­port Ap­ple Pay. Star­tups like LoopPay, Wal­laby, and Yoyo let com­pa­nies set up a mo­bile-wal­let plat­form. Build­ing a white-la­bel app on a ser­vice like Revel can cost a flat fee of $1,000, plus monthly charges. Pay­ment ter­mi­nals—

where mo­bile-wal­let cus­tomers can tap their phone to com­plete their pur­chases—can run from $ 150 to $300 each.

Alex Shuck, di­rec­tor of mar­ket­ing and an­a­lyt­ics for LevelUp, ad­vises small busi­nesses with 10 to 100 lo­ca­tions to bud­get at least $20,000 to de­velop a cus­tom app with the ba­sic suite of fea­tures. Busi­nesses with more than 100 lo­ca­tions, he says, may want to set aside “at least the cost of open­ing a new store into their mo­bile prop­erty as an ini­tial in­vest­ment—and half that again each year mov­ing for­ward.” That’s why some mer­chants go with a sim­ple white-la­bel so­lu­tion, or even just a loy­alty pro­gram and forgo a wal­let en­tirely. But larger mer­chants and those


Last year, $30 bil­lion was spent at in-store mo­bile-wal­let ter­mi­nals— and the vol­ume is pro­jected to in­crease 10-fold by 2022. seek­ing a cus­tom ex­pe­ri­ence may find that ad­di­tional fea­tures, like nu­tri­tional in­for­ma­tion for res­tau­rants, are worth it. And keep pay­ment-pro­cess­ing fees in mind. Ami­taabh Mal­ho­tra, chief mar­ket­ing of­fi­cer for Om­nyPay, a dig­i­tal-com­merce plat­form, says re­tail­ers us­ing third-party wal­lets like Ap­ple Pay are at the mercy of pro­cess­ing fees for each pur­chase—typ­i­cally 2 to 3 per­cent for credit cards and less than 1 per­cent for debit cards. (Ap­ple Pay charges 15 ba­sis points to the card is­suer per trans­ac­tion.) With your own wal­let, you can dic­tate what pay­ment types you’ll ac­cept.

All that said, mo­bile pay­ments in the U.S. ex­pe­ri­enced a slight dip last year. Trans­ac­tion vol­umes are higher out­side the U.S., Tweedt says. So you may be wary of in­vest­ing in a tech­nol­ogy that isn’t main­stream—or deal­ing with the headaches of train­ing and test­ing. Adop­tion of mo­bile-wal­let tech­nol­ogy “is still pretty small” among small busi­nesses, says Ni­cole Per­rin, an an­a­lyst for eMar­keter.

Given those fac­tors, rather than fol­low in the foot­steps of large re­tail­ers, which build their own cus­tom apps, Tweedt ad­vises launch­ing your ser­vice on a well-known wal­let like Ap­ple Pay, An­droid Pay, or Sam­sung Pay. Ap­ple Pay in par­tic­u­lar is worth fo­cus­ing on, he says, given its tor­rid growth rates.

“Mer­chants would be wise to adopt mo­bile wal­lets now,” Tweedt says, so they don’t miss out on an ex­pected spike in us­age once Ap­ple Pay starts ad­ver­tis­ing di­rectly to con­sumers, slated to hap­pen near the end of 2018. If wal­lets make sense for your busi­ness and cus­tomer base, they’re a great way to con­nect to your con­sumers—but, as ever, there’s no sub­sti­tute for a killer prod­uct or ex­pe­ri­ence.

Pho­to­graph by MAURI­CIO ALEJO

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