Understanding eWallets: Breaking Down The Competitive Landscape
In our previous articles on eWallets, we explored the growing demographics and geographics that fuel mobile payments. But it’s equally important to consider the level of competition in the marketplace. While eWallet adoption has been relatively slow among customers, the number of companies investing in mobile payments has increased dramatically.
US Industry players include mobile platform holders like Apple or Google, digital storefronts like Amazon, retailers like Walmart, and a wide range of third-party services. Internationally, these companies face stiff competition from AliPay, TrueMoney, and WeChat. It’s an increasingly crowded market, yet surprisingly, one that many companies could thrive in.
A 2016 study found that when it comes to mobile payments, PayPal far and away holds the greatest market share in the West with 76% among online consumers, but there is increasing variety in what many industry players consider constitutes a mobile wallet. Many only consider an app to be a true mobile wallet if it is able to contain payment cards, tickets, and reward programs. In this regard, Apple Pay is the most popular and successful eWallet in Western Markets. It launched well before competitors like Android Pay and Samsung Pay, and benefits from native iPhone integration. Since eWallet adoption is largely tied to smartphone adoption in key demographic groups, Apple gained a natural head-start from its technological innovations. In a survey from First Annapolis, Android Pay and Samsung Pay’s combined adoption rate was 34% — which was the same as Apple Pay alone.
Apple’s biggest eWallet competition isn’t tech companies, but retailers. Merchant-branded apps have seen incredible growth in recent years, offering mobile payment services that double as loyalty programs. According to eMarketer, the Starbucks app recently surpassed Apple Pay’s United States user base by 1.4 million customers. What’s more, First Annapolis found the Starbucks mobile wallet adoption rate is almost double that of Apple Pay.
Ironically, Apple Pay’s greatest strength is also its weakness — exclusive iPhone integration. While the service is fully available among Apple customers, any eWallets that are compatible with both iOS and Android devices can serve a much larger customer base. Starbucks is just the most popular example. In some studies, Walmart Pay serves a higher percentage of adult smartphone users despite a lower adoption rate. Outside of retailers, Paypal’s eWallet is platform agnostic and sees similar benefits. Amazon Pay is also experiencing steady growth thanks its built-in users base. Last year, Amazon revealed that 33 million of its customers used Amazon Pay to make a purchase.
Apple Pay is still doing incredibly well, and remains ahead of the competition in countries like Canada. But much like smartphone adoption itself, Apple isn’t the only game in town anymore.
International markets are generally more receptive to eWallets than the US, but it’s rare to see a single platform rise above the rest. Paypal certainly has a lead among online merchants, but most customers prefer domestic payment options when it comes to mobile and online purchases. According to a Financial Times survey, Dragonpay does well in the Philippines, while MoMo is well-established in Vietnam. Go-Pay is believed to surpass the competition in Indonesia, although parent company Go-Jek often doesn’t release complete statistics.
In these examples, competition for eWallets often comes not from retailers but banks. In nations like Thailand and Malaysia, banks are trusted and well-established institutions that serve high percentages of the population. Some banks have offered their own payment options while others have been slower to adapt to eWallet technology. Either way, third-party eWallet companies are unlikely to surpass banks in the short-term as eMoney licenses are highly regulated.
These matters aside, banks and non-banks can work together to create a strong eWallet platform. TrueMoney’s PromptPay service — currently the most popular eWallet in Thailand — shares features with the Siam Commercial Bank.
The major case study to watch is China, where eWallet adoption rates are high and make up a significant portion of the economy. Mobile payments have largely consolidated around AliPay and WeChat, which make up 39% and 33% of the overall Chinese market. WeChat started out as a chat software service before implementing eWallet features, but it has benefitted immensely from a built-in audience, third-party integration features, and QR code support for in-store purchases.
While Apple Pay, AliPay, and PayPal certainly have international appeal, the eWallet market remains highly competitive. We can also expect retailers, banks, and other companies to embrace mobile payments as interest in the service grows. This has a few significant implications.
First of all, the eWallets with the best opportunities for growth will be accessible across multiple devices. Platform-exclusive services like Apple Pay will continue to do well, but will find themselves facing increased competition from retailers and platform-agnostic eWallets.
Second, it’s fairly likely market consolidation will occur to some extent, much like we’ve seen in China. The eWallet field is increasingly crowded for its age, with 35 non-bank entities in Malaysia alone, and growth rates can only offset oversaturation for so long. That said, an eWallet that falters in one country might succeed in another if it caters effectively to local demographics.
Finally, as international eWallet use grows, so too will digital payment regulations. How do eWallet companies respond when an account is empty or inactive for a year? What happens when a customer passes away, and leaves their money to a relative using a competitor’s eWallet? Which data security practices are best when your business has access to a customer’s currency and their personal information and their digital currency? These are questions that must be addressed soon, and will set standards for the market as it develops.
It’s an exciting time for eWallets, but the industry faces many challenges moving forward. To succeed, companies will not only need to serve a growing audience, but ensure they stand out from competitors as well.