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The Global Battle for the Digital Wallet

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

The struggle to become to the digital wallet of choice for consumers around the world continues...and with good reason. 

The market for digital payments made over mobile devices was forecast to be worth roughly $240 billion in 2011 and that number is expected to triple over the next five years. The expansion will be fueled by the growing number of mobile devices with NFC (near field communications) capabilities. Samsung already has the Galaxy Nexus that has NFC chips and other handset companies are expected to come out with similar devices this year. 

It has been the limited number of NFC-enabled smartphones and reluctance of the part of some retailers that has held back the growth of the digital wallet. But some major retailers, such as McDonald's, have now introduced terminals that customers can use to make a payment digitally. 

One of the major players in this sector is Google (NASDAQ: GOOG) with its Google Wallet. The problem for it so far is that it has only one major wireless carrier as a partner – Sprint Nextel. In addition, it has an agreement with Mastercard and Citibank. The two largest wireless carriers in the United States – Verizon and AT&T – have combined forces to soon come out with their own version of Google's wallet, Isis. The two companies have partnered Isis with a number of payment technology companies and with all four of the major credit card companies. 

Of course, the battle for the digital wallet extends far beyond the United States' borders. So it is interesting to note the moves that major U.S. companies like Visa (NYSE: V), the world's largest payment processor, are making overseas. Visa has already made clear that it believes the future of payments across the globe will be electronic banking services. 

In a brilliant move, Visa recently announced a global partnership with one of the world's biggest mobile providers – Vodafone Group ADR (NASDAQ: VOD) that will allow Vodafone subscribers to pay for transactions using their smartphone. The mobile digital wallet service will be available in all 40 countries that Vodafone operates in. The company has approximately 370 million customers, many of whom live in fast-growing emerging economies. 

Initially, customers will have to set up a pre-paid account in order to make payments. But the goal is to soon open up the platform to other financial institutions that offer Visa cards. And in order to encourage the growth of such payments, Visa has made the transactions fees for these transactions less than for charge or debit card payments. 

It is still early innings in the game to lure consumers to the digital wallet, so there is no clear leader right now. Although Visa's deal with powerhouse Vodafone may have given them an edge globally. It may turn out that there is no real 'winner' in this sector. The only sure thing to say right now is that with so many players pushing the technology, it will should aid the wide adoption of it by consumers. As research firm Forrester forecast, by 2016 many consumers will simply leave their physical wallets at home and shop with their phones. 

The Motley Fool has no positions in the stocks mentioned above. tdalmoe has no positions in the stocks mentioned above. 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.

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