Report: Target to Launch a Mobile Wallet

23 Dec 2015 | Author: | No comments yet »

Look out, Apple Pay and Android Pay — here comes Target Pay.

Following Walmart’s debut of its in-store mobile payments service, Target is reportedly working on developing its own mobile wallet, according to Reuters. The report didn’t give many details on how the wallet would work, but it did indicate that Target TGT -1.76% would likely be using barcode scanning technology to allow consumers to pay with the wallet at a terminal. The move would put the fourth-largest U.S. retailer in direct competition with other payment platforms, including Apple Pay, Android Pay, and Samsung Pay, for example.

From a record nearly $3 billion spent on Cyber Monday to kids making their Christmas lists on apps instead of crayon-and-paper for Santa , the 2015 holiday season has been increasingly mobile. What’s interesting about this report is that, like Walmart, Target is also a member of a retailer-backed consortium MCX which is developing a mobile wallet to compete with the likes of Apple Pay, called CurrentC.

Mobile retail apps have seen an increase in monthly visitors since their popularity has been tracked, according to digital analytics company comScore. That app has not yet launched, but has been criticized for being a clunky solution in comparison with the NFC-based tap-and-pay efforts from Apple, Google and others. Similar to Walmart, Target famously decided not to accept Apple’s mobile payments technology, Apple Pay AAPL -1.91% , when it was introduced last fall.

The most-used apps for major retailers during November 2015 were Amazon Mobile AMZN, -0.56% , Walmart WMT, +0.32% , eBay EBAY, -1.89% , Target’s TGT, -1.80% Cartwheel app and Starbucks SBUX, -1.41% . Walmart and Target instead joined the Merchant Customer Exchange, a partnership of major store and restaurant chains, with ambitions of creating an Apple Pay rival. That’s certainly believable given that Target has already rolled out a suite of beautifully designed mobile applications that are also innovative from a technical perspective. And as shoppers have shown an affinity for the online and mobile shopping experience, retailers have scrambled to gain competitive edge, adding new features to their websites and apps, such as loyalty programs and advantages like the ability to place a complicated coffee order in advance. For example, Target’s mobile couponing app Cartwheel is a top 10 app on the App Store today, and sees heavy usage from consumers who tap to add items to their savings list then scan a barcode at checkout.

These companies are clamoring to take a stake in a potentially huge mobile payments market, which is expected to handle $142 billion in transactions by 2019, according to Forrester Research. The company’s flagship app also introduced its own in-store item locator, and uses beacon technology to ping consumers about in-store deals, trends and recommendations.

Walmart is following the model of Starbucks, which has created one of the more successful mobile payments apps in the past decade, according to Sucharita Mulpuru, an analyst at Forrester Research. Outside of mobile, Target has been open to trialing new means of reaching its customers, whether that’s through on-demand grocery deliveries or curbside pickups – further indicators that the company is not slow to embrace new technology and services.

Apple Pay and Android Pay require near field communications (NFC), while Samsung Pay can be used on virtually any credit card terminal without NFC because it emulates an actual physical card swipe using LoopPay technology. Starbucks recently said that mobile payments account for 20% of all the chain’s 9 million weekly in-store transactions, more than double the figure the company reported two years ago. As a result, the shopper builds the habit of using the app, becoming familiar with its features and in some cases working toward rewards, like complimentary drinks and snacks for users of the Starbucks, Panera PNRA, +1.09% and McDonald’s MCD, -1.10% apps. “It makes a lot more sense to make a single-branded app in those scenarios, more so than apparel specialists you might go to once a quarter,” Evans said. That makes it sound like the payments process could actually be integrated within Cartwheel, though the wallet has not actually moved to the point of testing, the articled notes.

Plus, consumers are unlikely to commit to many apps, meaning they won’t download apps for stores they rarely visit, said Mark Ranta, the head of digital solutions at ACI Worldwide, an electronic banking and payment company. The holiday season is a particularly good time to offer rewards and incentives, like Amazon promoting special deals exclusively available for app users, in hopes of getting customers to download the app and continue to use it throughout the year, said Ross Rubin, the senior director of industry analysis for App Annie, an analytics and market research company. A spokesperson said that the retailer will “continue to explore additional mobile wallet solutions, and will ultimately work to provide the best and most sought-after mobile wallet experiences for our guests.” Some retailers, including Wal-Mart and Target, are attempting to avoid those fees by creating their own mobile-payment system called CurrentC that would only allow customers to pay through their checking account and select merchant debit, merchant credit and gift cards, bypassing non-branded credit cards entirely. The unfortunate part of all this is that Target and Walmart don’t accept Apple Pay or Android Pay, so consumers will be forced to open a separate app when shopping in those stores.

Because merchants are charged for the total amount spent and also for each transaction when customers use credit cards, they can shave off costs when customers pre-load a larger amount of money onto a gift card, then use that for future purchases.

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