Microsoft Wallet disappears, other Pay Wallets keep struggling

Microsoft Wallet is retired

Microsoft just announced its intention to retire Microsoft Wallet at the end of February. Microsoft Wallet, launched in 2016 and later rebranded as Microsoft Pay, was Microsoft’s answer to Apple Pay and Android Pay, bringing the equivalent NFC payment functions to Widows-based smartphones. Like Android Pay, Microsoft Wallet used HCE (Host Card Emulation) to complete in-store payments. At its launch, Microsoft Wallet succeeded in signing large US issuers such as Bank of America, TD Bank and US Bank.

However, after years of existence, Microsoft Wallet suffered from the setbacks of Windows Mobile and the lower than anticipated takeoff of “Pay” wallets. According to Fintech Futures, Microsoft Wallet accounted for 0.33% of transactions in December 2018 while Android Pay was credited with 74.36%.

US Pay battle

The “Pay Wallets,” Apple Pay, Samsung Pay and Android Pay, have not stormed the market as was anticipated when they launched. On the contrary, their operation remains more difficult for the consumer than a usual credit or debit card, which has led to a lower adoption rate.

Nevertheless, the acceptance network for these wallets is still increasing as Target, a major US retail chain, is now accepting Apple Pay, Google Pay and Samsung Pay as well as contactless cards from Mastercard, Visa, American Express and Discover in all of its stores. Apple also announced the expansion of its US acceptance network to Taco Bell stores, Hy-Vee supermarkets in the Midwest, Speedway convenience stores, and Jack in the Box restaurants, while it is already accepted at Costco, CVS Pharmacy and 7-Eleven.

However, these “Pay Wallets” proposed by handset vendors are only adopted by 14% of US consumers, according to Juniper Research, as they are in competition with the solutions proposed by merchants. Walmart prefers to push its own Walmart Pay than to accept other payment solutions. Pay Wallets are also in competition with proprietary solutions from financial institutions, such as Chase Pay, which is the new name of the original MCX project, launched by Walmart and other merchants.

International adoption grows… slowly

On a more global level, according to Loup Ventures, the global number of Apple Pay users has grown from 82.3 million in December 2016 to 382.6 million in December 2018. This is also demonstrated by the takeoff in terms of transactions: from 250 million Apple Pay transactions in Q4/2016 (Apple’s fiscal first quarter of 2017) to 1.8 billion transactions in Q4/2018 (Apple’s fiscal first quarter of 2019).

Interestingly, 85% of Apple Pay users come from outside the US which is consistent with the poor level of penetration of contactless terminals in the US.