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CoverStory

Many of the largest merchants in the country had been
betting on an alternative approach to mobile payments,
quick-response codes that did not rely on traditional
credit and debit card rails. (NFC-based mobile wallets
like Apple Pay and Samsung Pay require users to tie
the wallets to specific card accounts.) The Merchant
Customer Exchange LLC, a consortium of retailers
behind that move pulled the plug on the venture in
June 2016.

Ties to loyalty

More recently, several large retailers have developed
their own mobile payment apps. The latest of these,
Kohl's Pay, is a proprietary mobile wallet for store-card
holders tied to the retailer's successful Kohl's Cash
loyalty program. Starbucks was the first to introduce
such an app several years ago and now claims mobile
payments account for a quarter of all payments in its
U.S. stores.

"Merchant wallets have a compelling user adoption
model," Sloane said. Peterson concurred, adding, "It's
about loyalty; payments is secondary."

Apple Pay, Android Pay and Samsung Pay all have been
making inroads with retailers large and small. Apple
reported that its mobile wallet is accepted at more than
3 million U.S. retail outlets. Samsung, with a smaller
user base than Apple, launched a rewards scheme in
November 2016 that allows consumers using Samsung
Pay to earn points toward gift cards and other rewards.
King expects more merchants to follow. "That's where
they'll see the most success, when they wrap it in a
loyalty program," she said.

Pew's research suggests rewards and discounts can
motivate consumers with smartphones to make
payments with the devices, this applies particularly to
millennials and gen Xers. While just 17 percent of the
U.S. population, as a whole, like the idea of receiving
rewards and discounts when making mobile payments,
it's 70 percent among millennials and 62 percent among
gen Xers, Pew said.

Dom Morea, Senior Vice President, of Business
Development at First Data Corp., agrees that support
for rewards will help drive consumer adoption of
mobile payments. He noted that many consumers
are overwhelmed by the number of rewards program
key fobs they carry and would prefer to have all their
rewards programs on their mobiles. "This is about
saving time, money, and helping consumers live their
lives better, faster and more cheaply," he said.

Concerns about security – specifically the risk of
identity theft and loss of funds – continue to be an
obstacle to consumer mobile wallet adoption. "Fear
is a powerful inhibitor, and fraud is top of mind for
many consumers," said Peter Olynick, Senior Practice

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