In my coverage as Forrester’s new payments analyst, I'll serve consumer product strategists who accept or facilitate payments as they create, navigate, and capitalize on digital disruption within payments.

We are in the early stages of unprecedented innovation and transformation of the consumer payments industry, and emergence of a digital wallet marketplace is the next act. The definition of a digital wallet continues to evolve as innovations come to market, and the term is sometimes used synonymously with “mobile payment.” However, there are significant differences. Forrester defines a digital wallet as:

A digital service — accessed via the web or a mobile application — that authorizes payment transactions from one or more payment sources and facilitates other commerce-related features, such as offers, coupons, loyalty rewards, electronic receipts, and product information.

As new wallets are introduced into the market, we will see consumers and merchants accelerate their trial and adoption. Yesterday, Google announced a new cloud-based version of their digital wallet that intends to address many of impediments associated with their first version.  In my new report out today, titled “Why The Digital Wallet Wars Matter," I frame the emerging digital wallet landscape, provide a profile of early adopters and how to capture their attention, and outline which wallets will ultimately win in the marketplace. Here are the key takeaways:

  • Hardware-agnostic mobile digital wallets face fewer hurdles than NFC-based wallets and will have faster adoption. The payments ecosystem is giving a much-needed boost to the rollout of NFC-enabled equipment (e.g., handsets and point-of-sale systems). By 2016, more than a quarter of US consumers will own an NFC-enabled handset. But NFC-based mobile digital wallets are not the only game in town. There are several hardware-agnostic wallets entering the market, and because they face fewer hurdles, they will see faster adoption. In his report titled, "NFC: What Lies Beyond Contactless Payments," my colleague Thomas Husson provides insight into the timing for broad NFC adoption and the opportunities to leverage NFC for other products and service experiences.  
  • Digital wallets will be a wedge between card issuers and consumers, and the wallet operators will charge them for the privilege. Forrester’s Consumer Technographics® data reveals that 50% of US smartphone owners are open to using their mobile phones for in-store payment and thatmobile bankers overindex among those with the greatest interest. Although early adopters are ready for this next evolution of their in-store shopping experience, traditional incumbents in the payments space are at risk of losing their existing control and influence of the customer’s purchase journey and experience when consumers adopt digital wallets offered by a third party. These market dynamics are sure to fuel a highly competitive landscape of wallet operators.
  • Winning wallets will be convenient to use, contextually relevant, with a compelling experience. Moving the needle on the adoption of digital wallets particularly for mobile digital wallets will require infusion of significant value throughout the purchase journey before, during, and after payment. Winning solutions will bring this to life through greater convenience, contextual relevance, and a compelling purchase experience.

My research will cover new entrants and alliances, innovative products, and disruptive business models that will transform the payments landscape. I’d love to hear your thoughts as I uncover what it means for consumer product strategists. You can reach me directly here or @deneecarrington on Twitter.