E-commerce grew 20% for Costco in fiscal 2015—20 times faster than store sales.
The payment powerhouse thinks consumers are ready. Some industry observers are skeptical.
If Visa Inc., a powerhouse of a payment company, builds a mobile digital wallet, will consumers use it for online and mobile commerce? Visa is betting so, but some analysts are skeptical.
Visa intends to launch its digital wallet this fall in the United States and Canada. It will store Visa-branded and non-Visa payment accounts and will support Near Field Communication-enabled payments. Near Field Communication is a wireless technology that consumers can use to make payments in stores waving their phones near a terminal. Marketers also can use NFC to deliver mobile marketing messages to handsets. For instance, a poster with NFC embedded can transmit a discount coupon to a shopper’s NFC-equipped mobile phone.
Visa’s mobile digital wallet also will hold shipping and billing information, the company says.
Visa reports it has lined up 14 financial institutions, including Barclaycard USA, the Royal Bank of Canada and US Bank, as backers.
Online, consumers with a Visa digital wallet will be able to enter user names and passwords to make a payment, and will not have to re-enter shipping and billing addresses. In other words, it will have similar functionality to PayPal, the online and mobile payment service owned by eBay Inc. As with PayPal, merchants will have to sign up with Visa and add the wallet as an option at checkout.
Visa also expects to offer opt-in marketing capabilities for consumers to receive coupons and promotions via the digital wallet.
But will consumers use Visa’s mobile digital wallet, or any digital wallet?
“That remains to be seen,” says Scott Strumello, an analyst at Auriemma Consulting Group Inc. “Others, including Citigroup’s C2it, have not taken off and were ultimately discontinued.” Citigroup started C2it as a digital wallet to compete against PayPal in 2000, but shut it down in 2003 after few consumers took to it.
PayPal, meanwhile, says it already has a successful digital wallet; its payment service can be used in e-commerce and m-commerce settings. Though it cannot yet be used in the offline world and does not yet offer NFC capabilities.
PayPal’s head start—it launched in 1998 as a person-to-person payment scheme—could give Visa trouble, says Gwenn Bezard, research director at Aite Group LLC. “It’s going to be an uphill battle for Visa to make any significant strides in the digital wallet space,” Bezard says.
While Visa is a powerful payments player, others, such as PayPal, are more limber, Bezard says. “Visa is a great company, but getting into the digital wallet space, one really needs to have a tight relationship with merchants and move very fast in developing consumer-facing products.”
No additional details are available about how Visa’s service will work.
“A lot of the details are not clear at this point,” says Beth Robertson, director of payment research at Javelin Strategy & Research. “And it won’t be in the market until the fall.”
Robertson says digital wallets have yet to gain much traction among consumers, so Visa’s effort may be primarily an effort to position itself. “It’s such a small emerging market,” she says.