The days of lugging around a cumbersome, overstuffed wallet may be coming to an end.
With the recent launch of the Apple Pay mobile wallet app, iPhone 6 and 6 Plus users will no longer need to cram an assortment of credit, debit, gift and loyalty cards into their back pockets or purses. And Apple isn’t alone in addressing the problem of uncomfortably large wallets; several VC startups have been busting into the space, as well, bringing innovation and real-world flexibility along with them. With an estimated 1.76 billion people around the world using smartphones every day to connect, share and organize their lives, one thing often not connected to our phone is our plastic-filled wallet.
A number of players have entered the space, yet mobile wallets have had a hard time getting adopted as the new form of payments; as of recently, only 6% of U.S. adults reported to have used a mobile wallet for an in-store purchase. A particularly crucial problem that several startups are addressing is being able to use the new wallets at all stores. Before the integration of NFC (near field communication) chips in the new iPhones, Android users and iOS users were relegated to different forms of mobile payments. iOS users could only use their phones if a merchant had a QR code scanner, while Android required NFC compatibility. The two systems made it overwhelming for merchants, requiring them to pay for two systems; if they did purchase both, their counters were cluttered with devices.
Enter Coin and Stratos—two companies that provide mobile wallet apps to consumers, but rather than relying on contactless payment (such as Apple Pay), users are provided with wirelessly enabled cards that sync with in-phone apps holding information for the credit, debit, loyalty and gift cards of their choosing. Coin’s and Stratos’ offerings function like traditional bank cards so standard POS systems are fair game, lessening the burden on merchants to change their setups. And if your favorite business only takes cash, these cards also offer the ability to head over to the nearest ATM to make a withdrawal, a feature missing with the wallets of some larger competitors. Stratos recently announced it has raised a total of $5.8 million in VC funding, while Coin has raised $17 million to date; both companies expect to launch their products within the coming months.
Another problem facing Apple Pay (and mobile wallets provided by other corporates like Google) is that each wants consumers to only use its own app. Apple, for instance, has decided to restrict the use of its NFC chip to only Apple Pay, meaning that iPhone users wanting to use the NFC chip technology cannot go through any similar service. Several mega-retailers, including Wal-Mart, have stated intentions to not accept Apple Pay, venturing instead to create their own payment platform. This rift in the market opens up the opportunity for startups to create mobile wallets that consumers can use anywhere, introducing technology that deviates from contactless systems.
Of course, the mobile payment ecosystem doesn’t end with mobile and digital wallets. Square, which has received $717 million in venture funding to date, brought mobile payments to small businesses with its plugin credit card reader; Venmo, which received funding from VC firms like Accel and Greycroft before being acquired by Braintree in 2012, brought free peer-to-peer money transfers to anyone with an email or phone number; and Mozido, which very recently raised $185 million, is one company providing a bankless end-to-end merchant and consumer payment platform. It is mobile wallets, however, that are fast becoming the next big thing in tech, even if they haven’t become mainstream just yet. With startups continuing to disrupt even the niche market itself, our mobile devices seem sure to become the portal for all of our payment methods.