• by Mark Walsh  @markfwal, December 2, 2013

Reports on holiday shopping over the Thanksgiving weekend show mobile grabbing a bigger share of retail spending than during the same time a year ago. Mobile made up 23.2% of online sales -- up 43.7% from last year, according to the IBM Digital Analytics Benchmark.
 
But in-store mobile payments still aren’t playing a major role in mobile retail spending, despite the slew of initiatives in the mobile wallets space over the last couple of years.

About a quarter (26%) of U.S. online adults who use a cell phone are interested in in-store mobile payments, and 5% already use them, according to a new Forrester study.

Those figures -- based on a survey of more than 4,000 in the third quarter -- are up from 17% and 1% in 2011, respectively, indicating adoption is gradually increasing. When it comes to mobile wallets overall -- for use either in-store or remotely -- 61% of U.S. online consumers have heard of digital wallets, but only 11% use one.

“Driving consumer interest and adoption is a steep, uphill climb in developed markets because the current payment systems work quite well,” observes Denee Carrington, a Forrester analyst and author of the report, “Understanding Digital Wallet Options for Your Business.” Even so, she suggests that mobile wallet adoption will continue to grow as products improve.

To help clarify the landscape, the study separates the digital wallet marketplace into three models: remote-only, proximity-only and omnichannel. The best-known players in the first category are Apple’s iTunes and Checkout by Amazon. Others include Braintree Payment Systems’ Venmo Touch, Visa’s V.me offering and 2Checkout.

In-store-only mobile competitors include the telecom-backed Isis service, Apple’s Passbook, and Square Wallet, along with branded options from financial service institutions like bPay from Barclaycard US. Among omnichannel competitors are Google Wallet, MasterCard’s MasterPass, PayPal, Dwolla and Paydiant.

The last grouping -- crossing over both online and in-store payments -- is expected to see the fastest growth, although remote-only wallets are the most prevalent today.

Providing value-added features is a key way that companies are trying to get consumers to switch from simply using a credit or debit card, as well as set themselves apart from rival wallet offerings. The Forrester study notes that nearly all wallets include offers and coupons, but value-added features can vary significantly depending on whether they are from a merchant, technology company, or financial institution.

In addition to coupons, merchant wallets from iTunes, Starbucks, Target and others typically include mobile gifting and loyalty program integration. “Merchants that have their own wallet have the advantage of only needing to drive adoption with their customers, which is a smaller population needed to achieve scale,” states Carrington.

Wallets from technology players like PayPal, Paydiant and Square focus on reducing friction through services like pre-ordering and in-store pickup. PayPal also offers instant credit to help merchants complete the sale of larger items.

Financial firms, by contrast, have offered more limited value-add services to date. But in addition to things like fraud detection and authentication, they are expected to add enticements like loyalty rewards and card-linked offers.

Aside from account information, coupons and loyalty rewards, other top features that people want to see in a mobile digital wallet include price comparisons (65%), digital receipts (63%), location-based offers (62%), digital tickets (61%) and pay-at-table (61%).

Such added benefits hold the promise of generating more revenue for merchants by attracting new customers and driving more business. But they have to be part of mobile wallet options that are quick, reliable and easy to use to compete with the convenience of traditional card payments.

"Mobile Shopping" photo from Shutterstock.