With no clear leader in mobile payments, a rapidly growing number of merchants are planning branded payment apps threatening to cause consumer fatigue and a shakeout.

A large and growing variety of merchants have introduced or are planning to launch their own mobile payments solution, including McDonald’s, Wendy’s, Walmart and Target. While these merchants are watching Starbucks’ success in this category and hoping to repeat it for themselves, they are likely to face a challenge encouraging consumers to not only download their apps but also come back to them on a regular basis.

 “While I don’t believe that too many options will slow adoption of mobile payments as a whole, over time consumers will experience app fatigue and abandon white label apps that aren’t providing them with any significant value proposition to keep them active, e.g. loyalty and reward programs,” said Nathalie Reinelt, San Francisco-based analyst at Aite Group.

“As with any other wallet, consumers will ultimately end up choosing the payment instruments that work best for how they transact on a daily basis and will likely carry a blend of ubiquitous mobile payment and white label apps in their mobile wallets,” she said.

“As the market changes and more inclusive apps gain traction, I fully expect to see some merchants opt out of the white label space unless they see a significant ROI.”

No clear leader
Not too long ago, it was thought that a broader mobile wallet enabling payments across multiple merchant locations would lead growth in this category.

However, Isis and Google Wallet have failed to gain much steam, in part because of challenges related to gaining the kind of cooperation across multiple organizations required for such an endeavor.

At the same time, PayPal continues to expand its mobile payments wallet app while a number of banks, credit card companies and others are also exploring their own solutions.

With the absence of a clear leader, merchants are anxious to bring out standalone branded payments apps that work in their locations alone.

While a number of these have been announced in the past six months, more are likely to come.

A consortium of over 70 merchants called MCX is working on a mobile payments option although a launch date has not been announced. MCX will offer a white label solution so that merchants can integrate mobile wallet capabilities and value-added services into their own branded apps.

Smartphone as wallet
The proliferation of mobile payments apps for individual merchants is, in effect, turning a consumer’s smartphone into a mobile wallet.

“Effectively the smartphone is the mobile wallet and consumers will select which payment instruments they decide to keep in it,” Ms. Reinelt said. “Some white label apps, such as Starbucks, will absolutely make the cut, others will likely see attrition once more inclusive solutions are broadly available.”

On the surface, the idea of standalone, branded payments app may seem like a good one because this would enable merchants to convert anonymous, cash-based transactions into transactions that can now be tracked, giving the merchant a richer data set for enabling better marketing campaigns.

However, it is still not clear how much consumer demand there is for mobile payments.

The PayPal app continues to add locations.

Daily-use customers
To attract consumers to their payments app, merchants are pairing them with loyalty and special offers to bring added value for customers who use the apps. Even with value-add offerings, merchants may find it a challenge to get the same kind of repeat use that Starbucks’ mobile payments app has.

“It’s unlikely that anyone in the near-term will have the success seen by Starbucks, but that’s due less to execution and more to the well-known reality that Starbucks is a bit of a unicorn in mobile payments,” said Drew Sievers, former CEO at mFoundry and now founding partner at fintech investor Operative Capital.

“No one else combines so many smartphone-toting daily-use customers with a massive card base and point of sale control,” he said.

Mr. Sievers says it is not unreasonable to think that consumers might have multiple merchant-specific loyalty and payment apps on their phone and that a single app to control all merchant relationships is a tall order because of how merchants want to control their brand and customers.

“It’s very difficult for a single entity to create a consolidated wallet that effectively combines multiple merchants,” Mr. Sievers said. “Merchants want to control their customer base and interactions.

“Many companies have tried to offer merchants a consolidated wallet, but none have been successful,” he said.

“Standalone apps are, for now, the path of most control and least resistance for a merchant to offer mobile payment and loyalty services. Until someone can offer a faster, yet equally powerful, way to participate in a consolidated wallet, standalone apps will be here to stay.”

Final Take
Chantal Tode is associate editor on Mobile Commerce Daily, New York