It’s no secret mobile wallets are struggling to find traction. When Barclaycard tapped Paydiant to help develop its mobile payments solutions eighteen months ago, the two companies decided to start small.
The start-small approach might be the way to go for new mobile payments solutions in the future.
The test market chosen for the solution, eventually called bPay, was Newark, Del., home of the University of Delaware, a public institution with some 19,000 students. Salespeople from Barclaycard canvassed the university area and also the nearby city of Wilmington.
“We looked at providing value to Tier 4 merchants,” said Angel Carra, head of mobile relationship and operations management at BarclaycardUS.
Visa defines Tier 4 merchants as “Merchants processing less than 20,000 Visa e-commerce transactions annually and all other merchants processing up to 1 million Visa transactions annually.” The focus on small merchants allowed bPay to zero in on concerns over pricing and point-of-sale technology that might not be an issue to much larger partners.
bPay, like other Paydiant solutions, uses a QR code displayed on either a point of sale tablet or receipt for the wallet-holder to scan.
The idea of starting in university communities is not new. Clinkle is set to try the same thing, and, of course, a certain social network famously began at just one university (er, Facebook). Mobile wallets similarly need to benefit from the network effect, and students and the businesses they frequent are the perfect proving ground.
Merchants provide custom offers for bPay account holders, who now number “a few thousand,” Carra said. The offers emphasize loyalty and rewards — “Tier 4 merchants want repeat sales,” Carra said.
Barclaycard is also offering deals on Android smartphones to drive adoption among the student population.
While the focus now is small, Barclycard has big plans for bPay. The wallet is an open wallet, meaning not only that users can use whatever cards they like as their payment vehicle, but also that bPay merchants can accept transactions from other digital wallets on the Paydiant platform, for example, like those offered by Fifth Third Bank, Capital One, or Bank of America. Those wallets are currently being piloted in Cincinnati, Richmond, Va., and Charlotte, N.C., according to Jed Rice, SVP of business development.
For its part, Paydiant’s strategy is explicitly facing both directions: banks and retailers. The mobile wallet issuers that will succeed, Rice said, are those with “an existing brand presence and an existing customer relationship.” Banks fit that bill, as do major retailers. (Paydiant epxects to announce several Tier 1 and 2 partners this fall.)
For deployment, you can go big with a national rollout. Starbucks proved this model, ” Rice said. “Or you do regional rollouts,” as Barclaycard is doing. Paydiant helps with the planning of this by matching numbers of estimated customers to merchants.
Paydiant also entered a partnership with Diebold and FIS, announced just last week, to enable cardless ATM withdrawals, which is done through the wallet app and helps accustom consumers to using it.
A recent Motley Fool piece pointed to banks’ advantages in the mobile wallet space since banks h0ld the cards and consumers’ money. (Most PayPal and Google Wallet accounts are empty.) bPay’s student pilot will bring valuable learning form the student network to try and move mobile wallets in the country at large.