Merchant Wallet Enablement in the Isis Launch Markets

Navigator Edition: October 2012
By: Paul Grill and Dara Khan

In late October, Isis went live with its soft launch in Austin, TX and Salt Lake City, UT.  Hundreds of local and national merchant locations will accept mobile payments from customers that choose to pay with the wireless carriers’ wallet.  Isis is competing with other wallets focused on the point of sale (POS) like PayPal and Google Wallet.  Retailer enablement is one of the most critical components of wallet growth.  The major competitors have announced acceptance by leading merchants like McDonald’s, J.C. Penney, and Home Depot.   To determine how adoption is progressing at the merchant level, First Annapolis utilized published information from the wallets (which may be based on card network contactless data) to examine which merchants are enabled for the major wallets in each of the cities.

Austin and Salt Lake City are young, affluent cities with higher median annual household incomes and greater percentages of their populations under 40 than the nation as a whole.  These cities are also geographically isolated, making it easier to execute a targeted marketing campaign.  According to the merchant locator tools and the announcements provided by the three major players, 520 locations in the Austin Metropolitan Statistical Area (MSA) and 418 in the Salt Lake City MSA are enabled for one or more of the three wallets.  Only 22% of stores in either city that have adopted are local merchants.  PayPal’s solution is currently only enabled by national merchants.

Figure 1: Reported Locations Enabled for One or More Wallets as a Percentage of Potential Acceptance Locations

Sources:  Wallet locator tools, U.S. Census Bureau.

While wallet enablement totals about 1,000 locations, penetration of all likely card accepting merchants in the two MSA’s is still quite low, with less than 1% of the total potential merchant locations enabling wallets.  However, adoption is higher within high-frequency merchants.  Department Stores, Drug & Pharmacy, and Petroleum & Convenience verticals are the highest penetrated in Austin and Salt Lake City, at 38%-46%, 19%-27%, and 13%-37%, respectively.  Nine percent of Food/QSR merchants in either city have adopted one or more of the mobile payments services.  Specialty merchants like Office Depot and Petco are also among the early adopters at 7%-9%.  The penetration in these merchant segments, as well as the fact that most adopters are sizable, big box outlets, suggests that the potential transaction and sales volume penetration, once consumers begin using wallets, may be higher than store penetration.

The analysis revealed other nuances of adoption.  First Annapolis contacted each of the reported locations for the three wallets to determine employee awareness of the payment methods.  Between the two cities, 27%, 30%, and 33% of listed merchants confirmed knowledge of acceptance for PayPal, Isis, and Google, respectively.  Typically, employees were either well-versed on the wallet or, in most cases, did not know about the product.  This may be due to limited employee knowledge, lagging implementation, or reporting being based on out-of-date contactless information.

Another finding from the analysis is that the reported acceptance of multiple wallets by a single merchant differs meaningfully between the two Isis launch cities.  The high degree of overlap in Austin is primarily due to merchants with multiple locations that enable both wallets, like 7-Eleven, CVS, and local gas and QSR merchants.  In Salt Lake City, the wallets report meaningful differences in enablement, even though contactless adoption reporting should be similar.  In particular, the Isis locator tool reports several McDonald’s locations that Google does not.

Figure 2: Multi-Wallet Adoption as a Percentage of Reported Locations that Accept a Wallet

Source:  Wallet locator tools, U.S. Census Bureau.

Digital wallets still have a long way to go in terms of enabling merchants, but at least several important verticals within retail trade already have 10% or higher reported wallet enablement.  Now, the challenge for wallets will be to stimulate both consumer and merchant awareness to drive mobile transactions at the POS.

To discuss the more detailed results of the analysis, please contact Paul Grill, Partner specializing in Mobile Commerce and Emerging Payments,; or Dara Khan, Associate specializing in Mobile Commerce and Emerging Payments,

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