The frenzy over Apple’s formal launch into the digital wallet space has reached a fever pitch. There is no shortage of speculation around the widely anticipated “iWallet” – and for good reason. Apple has a slew of compelling assets to leverage for its wallet, like an existing consumer base with roughly 800M cards on file, Passbook, iTouch, iBeacon, and more. It also has a unique track-record of entering existing categories with elegantly designed solutions that redefine, then dominate -at least for a time. However, we can’t ignore the fact that the mobile wallet graveyard is littered with elegantly designed solutions that failed to take off. Case in point: Square Wallet.. 

When it comes to digital wallets “…build it and they will come…” simply does not hold true. The challenges of Google Wallet and Visa’s are two more familiar examples. To be clear – I do expect that over time Apple’s mobile wallet will have greater success than Square Wallet, Google Wallet, or  But an elegant user experience won’t be enough to do it. Merchants will determine whether Apple’s mobile wallet lives or dies.

Digital Wallets Require Scale, And Merchants Control The Levers At Checkout

Successful digital wallets must have a large consumer base that wants to use the wallet, and a large merchant base that accepts the wallet. With 800M cards on file, Apple can check the box on a large consumer base. Plus, iPhone users already lead the way with faster adoption of mobile payments and commerce. So an elegant solution, with value added services that streamline or enrich the commerce experience, plus the “cool factor” of an “iWallet” will likely inspire a large group of early adopters to give Apple’s wallet a try. But motivated consumers must have someplace to use the wallet. Actually, not just “someplace,” but a great many places where early adopters shop or spend with regularity. 

Starbucks gets this. It continues to be the shining example of success for in-store mobile payments. The habitual nature of purchases, plus Starbucks’ control over the user experience at checkout are key factors in the success of the payment solution. In contrast, the expensive lessons of Google Wallet, Square Wallet, and Visa’s illustrate that even with strong brand awareness and deep pockets, a merchant’s control over its checkout experience will directly affect a wallet’s success.   

To Win At Checkout, ‘iWallet’ Must Have a Compelling Merchant Value Proposition

As I discuss in my new report, many digital wallet competitors have made the mistake of focusing almost exclusively on consumer value which hasn’t been enough to motivate merchants. In fact, many merchants have already begun to pursue their own integrated mobile payments and commerce apps (e.g., Macys, MCX, Starbucks and many QSRs). To be successful, Apple’s wallet must have a compelling merchant value proposition – like lowering a merchant’s operational costs or helping to drive more revenue – in order to win merchant acceptance and preference at checkout. The good news is that Apple is uniquely positioned to do just that. Unlike other digital wallet providers, Apple is a merchant itself, and has both credibility and experience in successfully integrating mobile payments that likely lower costs with faster throughput, and drive greater revenue in its own stores. In addition, iBeacon and Passbook – two features widely rumored to be integrated into Apple's wallet – are specifically designed to provide value to merchants by helping them more effectively engage with their customers. Finally, Apple has historically been quite successful in creating ecosystems which enable participants (e.g., merchants and developers) to uniquely enhance their individual brands and commerce experiences. Apple’s wallet strategy is bound to do the same. 

To date, Nordstrom has been the only merchant rumored as one of Apple’s launch partners. If true, Nordstrom is sure to be an outstanding partner, but Apple will need a good many more – but that shouldn’t be a problem. In fact, some national merchants have been waiting since last year when Apple announced its intention to launch a wallet before deciding on their own mobile wallet strategy. Others have scrapped plans that were underway in order to wait for Apple. 

There is no question that Apple’s entry will move the mobile wallet market. The question then is whether it has enough to create a sustainable advantage with merchants, who will ultimately decide which wallets wins.

Check out my new report to learn more about why merchants will pick who wins the digital wallet wars.