The Rise of Digital Wallets

Mary is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

A digital wallet, or e-wallet, allows users to make e-commerce transactions quickly and securely. The digital wallet has evolved into a service that provides mobile, online users with a convenient way to store and use online shopping information as well as a way to make and receive payments. With the ever-increasing popularity of smartphones, digital wallets have evolved even further as readily available applications to mobile phone subscribers.

MasterCard (NYSE: MA) recently announced that they will be partnering with Deutsche Telekom to launch a mobile payment platform that allows customers to pay for goods and services with their cellphones. The partnership will increase mobile payments with Deutsche Telekom’s 93 million mobile subscribers throughout Europe. The first consumer roll-out of the new partnership will take place in Poland later this year. German subscribers will also be introduced to mobile payments, beginning with a trial later this year and continuing into 2013.

In February, Vodafone (NASDAQ: VOD) agreed to a deal with Visa (NYSE: V) to develop Vodafone-branded mobile payment services to the company’s base of 398 million customers in more than 30 countries. The partnership combines the companies’ global reach and expertise to bring Visa payment functionality to consumers around the world. The new proposition will be based on the Visa prepaid account and offered to consumers in partnership with Visa issuers. The companies will also work together to enable Visa issuers for mobile payments globally.

American Express’ (NYSE: AXP) digital wallet is known as Serve. Similar to Visa’s deal, it is a reloadable prepaid account designed for anyone that provides a safe way to pay in stores, online, and while mobile. It also allows users to send and request money from Facebook as well as via email and text. Users are able to access their account within the mobile application.

MasterCard, American Express, and Visa are all aware that digital wallets and mobile, agile payment platforms are increasing in popularity and users. While American Express relies on its own homegrown service, MasterCard and Visa are reaching out to mobile phone providers in efforts to get their services out to the masses. In this area, American Express could be falling behind in terms of market share and customers that use their products and services. MasterCard and Visa are certainly on the right path to making their products and services part of the everyday mobile lifestyle.

MaryPosey has no positions in the stocks mentioned above. The Motley Fool owns shares of MasterCard and has the following options: short OCT 2012 $55.00 calls on American Express Company, short OCT 2012 $60.00 calls on American Express Company, and long OCT 2012 $65.00 calls on American Express Company. Motley Fool newsletter services recommend American Express Company, Visa, and Vodafone Group Plc (ADR). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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