Is 'Target Pay' a Sign of Mobile Wallet Overkill?

Target Corp. is tight-lipped on the details of its proprietary mobile wallet, but reports of the retailer's plan for a software-based wallet app early next year are adding to the concern that the mobile wallet market is becoming oversaturated with options too early in its lifecycle.

When Walmart launched its own Walmart Pay wallet this month, there was immediate speculation that other mega-retailers like Target, Best Buy and Meijer would follow this example. Target may be first in line, according to a Reuters report last week indicating that it is working on a bar code-based payment app. This approach would echo the success of the Starbucks Card app, a bar code-based payment app that launched nationwide in Target Stores in 2010 before expanding to standalone Starbucks locations.

This makes the mobile wallet market a very crowded niche. A year after Apple Pay’s debut, consumers are being bombarded with pitches of Samsung Pay, Android Pay, Walmart Pay, LG Pay and Chase Pay. These join pre-Apple mobile wallets such as SCVNGR's LevelUp and P2P apps such as PayPal's Venmo.

And shoppers aren't begging for more options. Though Apple succeeded in signing on with many banks and merchants upon Apple Pay's launch, the mobile wallet's earliest consumer adopters made infrequent use of the Apple wallet.

“It’s not just the fragmentation we’re starting to see from the overall collection of wallets, but Walmart and Target doing their own wallets introduce the scary prospect of death by a thousand wallets, if each retailer is going to have their own,” said Nick Holland, a Boston-based independent payments consultant. “I don’t think consumers want a separate app for every retailer they frequent, and I also don’t think it’s feasible for the industry.”

It's unclear at this point whether Target's new effort is a part of the Merchant Customer Exchange's CurrentC wallet, of which Target is a backer. Though the MCX wallet was designed as a bar code based-app that could be embedded within merchant apps, other prominent MCX members such as Best Buy have begun supporting competing wallets, including Apple Pay.

Walmart, another prominent MCX backer, is marketing Walmart Pay without any overt ties to the CurrentC model. For example, Walmart Pay supports credit and debit cards as funding options, while CurrentC is designed around ACH.

Minneapolis-based Target's options are somewhat constrained by its choice of technology. The company recently updated its point of sale hardware to support EMV-chip card payments, but it does not support Apple Pay or other Near Field Communication-based mobile wallets at the point of sale.

Though Target is committed to MCX, “we continue to explore additional mobile wallet solutions, including Apple Pay,” a spokesperson said; Target has supported in-app payments from Apple Pay since the mobile wallet's launch.

Each of the various mobile wallets planned for the U.S. plays on a different perceived advantage: Banks have embraced the elegance and security of the tokenization approach used with NFC for Apple Pay, while Android Pay’s HCE technology provides a cloud-based, customized path for banks and merchants to develop NFC-based mobile payment apps. Samsung Pay is the only one designed to work with magstripe hardware, and Chase Pay brings the issuer's dominant market share in credit and debit cards.

MCX's CurrentC would seem to standardize the experience across multiple retailers, even if that experience is sprinkled across dozens of retailer apps.

“The two most important things necessary for mobile wallets to succeed are ubiquity and an excellent consumer experience,” Holland said. “I’m afraid that the more of these concepts that come into the market, the less likely we are to see the network effect that comes with ubiquity, not to mention that the user experience is all over the map with different approaches.”

But Target’s move means it doesn’t want to miss the main opportunity it has in mobile wallets, Holland notes. “Target clearly has a lot of consumer loyalty around its Red card, and you can’t blame them for wanting to leverage that.”

And Target may not need to fear much overhang from its 2013 data breach, despite the negative publicity and huge financial costs Target suffered then.

"The Target breach is kind of old news now, in consumers’ minds," Holland speculated. "The irony is that breach had nothing to do with mobile payments, and now we’re looking at a much bigger issue: Consumers don’t trust mobile yet and they’re already getting oversaturated with options."