Digital wallets could spread to more merchants
Digital wallets such as Apple Pay and PayPal have a problem: They’re not universally accepted.
Now Citigroup says it has an answer. It’s offering a new service that could increase the likelihood that consumers’ preferred payment method will be accepted by more merchants.
Currently, many e-commerce companies, utilities and other providers accept just one or two digital wallets, or in some cases, none. That means it’s a roll of the dice whether the digital payment that any consumer uses will be accommodated.
Citigroup says its new digital consumer payments business will establish relationships and connections with all the wallet providers, as well as “request for pay” services that debit directly from bank accounts, relieving merchants of that burden and ensuring they can accept the various payment methods.
“We will manage all the relationships,” says Manish Kohli, global head of payments and receivables for Citigroup.
The new business also will ensure seamless transactions overseas. For example, even if an Uber customer uses a certain digital wallet in the U.S., a similar purchase in Europe could be denied or delayed because of the unusual location. Citigroup’s global presence will ensure it goes through, Kohli says.
While the offering is targeted at merchants such as Netflix, Amazon and Uber, it also is “about giving choice and control to consumers to stay with whatever method of payment they like,” Kohli says.
The service will be rolled out to its customers by early next year, he says. Most Fortune 500 companies are Citigroup clients.
“Hallelujah!” Gartner analyst Penny Gillespie says of the offering. It can take more than six months for a merchant to establish a relationship with a payment provider, she says. And many smaller wallet providers aren’t available around the clock, shutting down in the wee hours for maintenance. Citigroup, she says, can ensure the network runs 24/7.
“It has the promise of enabling companies to have a cost-effective global payment strategy … and it will provide the payment method required by the consumer,” Gillespie says.
The service also should make it easier to handle international transactions that involve multiple currencies and ensure that money transfers occur without delay, says IDC analyst Rivka Gewirtz Little.
Kohli says Citigroup hasn’t determined the price merchants will pay for the service, though Gillespie says there likely will be a transaction fee.
But that doesn’t necessarily mean higher costs that will be passed to consumers, she says.
Any additional costs, she says, likely will be offset by cost savings for merchants that no longer have to deal with individual wallet providers and higher sales since they can accommodate more customers.
Citigroup says it will use MasterCard’s payment gateway, which is linked with wallets globally, to settle transactions.
“It has the promise of enabling companies to have a cost-effective global payment strategy.” Penny Gillespie, Gartner analyst on Citigroup’s new service