The Rundown

• Half dozen viable digital wallet products now on themarket.
• Some credit unions are still trying to figure themout.
• Experts urge patience with adoption.

The future of digital wallets is uncertain and the earlierpredictions of quick market adoption may have been proven wrong,according to some experts and credit unions using thetechnology.

Still, the interest continues to grow.

“We are getting a lot of inquiries. Credit unions aretrying to figure out what digital wallets are and what they do,”said Amanda Smith, senior technology and innovation manager at theRancho Cucamonga, Calif.-based Co-Op Financial Services. “We recently did a webinar onthe topic and had one of our largest (turnouts) to date.”

As for timelines, Brian Day, product leader with Des Moines, Iowa-based paymentsCUSO The Members Group, said, “We probably are still a couple yearsaway from mainstream acceptance of digital wallets. The market isever changing and highly fragmented.”

Nonetheless, Day said, “It's important to be proactive aboutdigital wallets. When things do move, you need to be ready. Put anoar in the water. Do something now to differentiate yourself fromcompetitors.”

There are at least a half dozen viable digital wallet productsalready on the market and pioneering consumers are busy using them.On that list is the Starbucks wallet, which some experts consider to be the mostsuccessful because it is in so many hands. Square is another thatcontinues to win strong buzz.

“Square is the only digital wallet that is being adopted at afast rate by merchants. That's what gets consumers to adopt awallet,” said Amad Ebrahimi, founder of MerchantMaverick.com, awebsite that reviews merchant processing services.

PayPal is also winning millions of users although some see itstill struggling to establish its use as a digital wallet.Nonetheless, its huge brand recognition keeps it in theconversation.

The frightening bottom line for financial services executives isthat consumers are taking the plunge into digital wallets but nottypically through a bank or credit union. However, at least somecredit unions are already deploying them.

In June, the Lansing, Mich.-based $1.6 billion Lake Trust CreditUnion rolled out MasterPass, MasterCard's digital wallet, in apilot with PSCU, a payment service provider in St. PetersburgFla., said Karen Kane, assistant vice president at Lake Trust. Oneof the main benefits of

MasterPass is that whenever a consumer sees it on an onlineretail storefront, he or she can pay by quickly logging intoMasterPass, Kane noted. There's no need to fill out address formsor provide credit card information to the retailer.

With barely 100 members, Kane acknowledged member adoption hasbeen slow but Lake Trust still views MasterPass as a successbecause “we wanted to get our toes wet with digital wallets andthis let us do it at very little cost.”

The MasterPass roadmap also calls for rollout of the product tobricks and mortar retailers, perhaps allowing consumers to pay witha few taps on their mobile phone and that may increase interest,Kane added. However, she said there is no announced timeline forthat product extension.

Lake Trust also is an early adopter of Google Wallet, a payments tool built around Near FieldCommunication technology that allows a consumer to tap and pay witha smartphone or some tablet computers. NFC adoption has been tepidmainly because retailer readiness to handle NFC transactions hasbeen slow, some experts have noticed. There are also few NFC-readyphones in consumer hands. For instance, Apple's iPhone is not NFCcomplaint and there haven't been any immediate indications to movein that direction.

“We are happy to have our brand in Google Wallet,” said Kane,who explained that Lake Trust gave Google permission to use itscard art. “We are excited about this because nowadays youalways have your phone with you.”

Exactly where Google is heading with its Wallet presently isunknown. Some experts said that it appeared Google had lost interest in the product, after vaporizing half a billiondollars on it. Others have said they believe Google is in thedigital wallet competitive space for the duration.

A third contender is Visa's V.me, which the $54 billion NavyFederal Credit Union, the nation's largest, recently announced it had adopted. The Vienna, Va.-based cooperativejoined some 50 other credit unions that already have signed onincluding the $15.8 billion, Arlington, Va.-based Pentagon FederalCredit Union and the $5 billion Marlboro, Mass.-based DigitalFederal Credit Union.

In explaining the V.me adoption, Randy Hopper, Navy Federal'sassistant vice president of credit card lending, said, “Given thatour members gravitate toward digital channels, we see this as anexcellent opportunity to offer something that makes their liveseasier.”

Shaun Bodington, who heads V.me for Visa, said “V.me is acommerce platform with payments at its heart. We have focused onecommerce. Consumers are challenged making purchases on mobiledevices. We are trying to make it convenient.”

If that sounds a lot like MasterPass, some experts say they seevery little difference between the products. But V.me is stilltrying to distinguish itself. For instance, Bodington said offerstargeted to consumers are in the V.me pipeline. “We are workingwith our merchants on that,” noted.

Because V.me Visa is intensely focused on security, Visa islooking at a multitude of ways to authenticate the consumer and thetransaction on the device with the goal being safer mobilecommerce, Bodington said. And, V.me is on the hunt for what Visaviews as anomalous purchases, in which the consumer who spends $2every day at a coffee shop suddenly tries to buy $500 in giftcards, he pointed out.

“We will offer challenge questions when purchases seemanomalous,” Bodington said.

What about Isis, which is the digital wallet supported by cellularcarriers Verizon, AT&T, and T-Mobile? And MCX, the new payment vehicle supported by a consortium of bigretailers led by Walmart? Skepticism continues to plague them,according to Michael Grillo, senior product marketing manager atpayments processor ACI Worldwide.

“While the big named providers continue to get the most aircover, the question isn't necessarily who is going to win themobile wallet wars,” Grillo explained. “The better question isbanks and retailers willing to give up control of their customerdata to a third party provider?”

According to Chris Gardner, a founder of Boston-based paymentsinnovator Paydiant, whichhas partnered with FIS,among others, to offer wallet products to financial institutions,there are two realities about digital wallets.

“This is definitely not winner take all. When this settles, wewill have five to 10 apps on our phones that we use to pay with,”Gardner said.

Meanwhile, financial institutions are positioned to succeed withthe technology. Credit unions already have the member relationshipbuilt on trust and that sets the stage for persuading the consumerto adopt new technology.

“We have always expected a slow pace of adoption,” Gardner said.“Be patient. Digital wallets will happen. Credit cards weren'tadopted overnight, it took years. Expect the same with digitalwallets.”