What's in Your e-wallet?

With the increasing popularity of online shopping and electronic wallets, credit card issuers are understandably nervous. Faced with online-friendly products like PayPal, they know that unless their payment methods play well in the new e-economy, they will be quickly displaced.

MasterCard has stepped up to the plate with a series of products designed to make online buying easy. Then it loaded them all into a funky glass-walled truck to trundle around and demonstrate to all and sundry. It recently visited Toronto, where we got a look.

The first product is the foundation for all of the others: MasterPass.

MasterPass is a digital service with a triple-header of features. First, it provides an easy, secure checkout method to online merchants. Since user credit card and shipping information is stored on MasterCard’s servers, and is only passed to the merchant at checkout, customers don’t have to enter it for every purchase, nor does the merchant have to worry about storing it. And if the customer is concerned about security, the optional mobile verification feature can text a four digit verification code to be entered to complete the transaction.

Second, it provides a MasterPass-connected electronic wallet. Not only does it store MasterCard data, it can host other credit, debit, and prepaid cards, as well as store cards and even the customer’s address book.

Third, there’s potential for value-added services such as loyalty programs, real-time alerts, and other things to enhance the shopping experience.

Over 250,000 merchants worldwide already participate (there are 52 listed in Canada, according to the store directory on the MasterPass website, although MasterCard says there are closer to 2000 participating), ranging from Cineplex and Mirvish to Grocery Gateway and Lowes.

In the spring of 2015, fans at the Air Canada Centre (ACC) participated in the pilot of a product that allowed them to order and pay for food, drink, and merchandise without having to move from their seats. Based on (guess what) MasterPass, Qkr! By MasterCard is an iOS and Android app. Fans enter their seat number, either by scanning the QR code on their tickets or selecting from drop-downs, browse the concession menu, order, pay, and then choose whether to pick up the items at the concession stand or have it delivered, all from their phones. It has already launched in the UK, and in a couple of US locations. MasterCard says that the ACC pilot went very well, and it is awaiting next actions. One thing holding deployment back, the company said, is ensuring adequate connectivity in all areas of the ACC.

Imagine being able to instantly buy products you see in magazines or on entertainment sites. That’s the promise of ShopThis! With MasterPass, which lets readers of e-publications and viewers of entertainment shop for the products they’re seeing on the site. All the reader needs to do is tap on the item to add it to their cart, then go back to their reading or viewing until they’re ready to check out. WIRED magazine was the first publication to take advantage of the technology, which is now available to Canadian publishers.

It’s a concept that appears to be catching on – Google just launched Purchases on Google, which puts “buy” buttons on ads in search results so people can impulse shop using payment information stored with Google, and Facebook has been testing a similar mechanism in its ads.

Pay With Rewards will allow MasterCard customers to pay for purchases using loyalty points, both online and in person. It is now available to Canadian banks, who can offer it to their customers. Points purchases show up on MasterCard statements as normal transactions.

MasterCard isn’t the only payment network who has jumped on the e-payment bandwagon. Visa has been heavily promoting its Visa Checkout, with vendors offering discounts to customers using the payment method. As with MasterPass, customers create an e-wallet that stores payment card (major credit card, prepaid cards, or Visa Debit), shipping, and billing information.

They’re not just trying to be trendy. There are big bucks involved. A recent AdAge article cites Comscore reports that Visa Checkout shoppers completed 69 percent of transactions, while PayPal Express Checkout customers completed 62 percent, and traditional checkouts only garnered a 41 percent success rate. That tells us that, with less than half of checkouts completed, current checkout methods just can’t cut it.

While MasterCard and Visa require users to create a new user ID and password to access their payment systems, American Express is taking a slightly different tack with its just launched Amex Express Checkout. Its customers don’t need to set up a wallet. They just use the user ID and password they already created to access their American Express accounts online. Of course, this means that they can only pay with an American Express card if they use the service.

Amex has partnered with Stripe and Apple Pay to extend its reach, as well as offering its own API to developers so they can integrate the solution into their apps (MasterCard and Visa also provide APIs).

Card issuers aren’t the only e-wallet game in town. Google’s Android Pay and the upcoming Samsung Pay have also thrown their hats into the ring, along with Apple, and even Rogers Communications. All have phone-based e-wallets, most of which use near field communications (NFC) to communicate with payment terminals at retailers. APIs allow developers to integrate the e-wallets into their mobile apps.

Ultimately, success comes down to merchant support. The more places an e-wallet is accepted, the more likely it will be to live on. Google has already tanked once, with the ill-fated Google Wallet, which died from lack of merchant interest, hence Visa’s work with merchants to persuade them to offer incentives to customers using Visa Checkout.

It’s still relatively early days, though. Although e-wallets have been around for several years, the market is finally catching up with their potential and is starting to adopt them as concerns over security and technical issues abate. The question is, will consumers follow? The stats tell us that those who do will complete more purchases, and pour more money into merchant coffers, so we can expect aggressive marketing to encourage e-wallet use.

If they succeed, the wallet in our pockets and purses may go the way of the floppy disk, becoming merely an icon on the screen that few remember as a physical object.