The Internet has turned the world of retail on its ear, creating both challenges and opportunities. But the mobile wallet could create new opportunities for retailers to ring up sales via smartphone-based purchasing and promotions.

TMCnet recently interviewed Rich Nespola, chairman and CEO of TMNG Global, which provides consulting and advisory services to companies in the mobile wallet ecosystem, about what’s happening on the mobile wallet front.

The term mobile wallet has been thrown around a lot lately. Define mobile wallet.

Nespola: Mobile wallet is all about convenience. It combines the security and payment capabilities of a credit card with the usability of a mobile phone, abetted by the value-add possibilities inherent in devices with built-in processors, high-quality graphic displays, ubiquitous Internet connectivity and touchscreens.

What are the key mobile wallet initiatives/players out there today?

Nespola: In the U.S., the two key initiatives of course are Isis and Google (News - Alert) Wallet. Google Wallet has the questionable advantage of being the first mover, with near-field communications readers at 150,000 U.S. retailers, and partnerships with Citigroup and Sprint. But Isis has lined up the other three major U.S. wireless carriers (Verizon, AT&T (News - Alert) and T-Mobile), and has partnered with all the major credit card companies in the U.S. Isis is expected to launch this year.

And don’t discount PayPal (News - Alert), which is working on its own initiative, and can draw from a large established consumer base and deep experience in online payments.

How are they different? The same?

Nespola: Isis and Google Wallet are very similar in that they both are secure app-based solutions that rely on near-field communications-enabled phones that are compatible with NFC readers at points of sale at brick-and-mortar retailers. The key difference is that Isis’s revenue model is based on taking a percentage of transactions, while Google Wallet’s is based on aggregating customer data and serving mobile advertising to users. Both Isis and Google Wallet seek to be the dominant standard.

Why is mobile wallet so interesting to so many kinds of companies, from Google to Verizon to MasterCard and VISA, to potentially Apple (News - Alert)?

Nespola: East Asia has often been at the vanguard of the adoption of mobile phone technologies, and mobile money is no different. The widespread availability of mobile wallet functionality in Japan demonstrates the huge revenue potential for mobile money in the U.S., by far the world’s largest credit card market. Even a tiny slice of global or U.S. credit or debit card transactions presents a significant revenue opportunity. With no established dominant player in the U.S., telecoms, IT companies, credit card makers and handset makers all see a market up for grabs.

What do you see as the role and prospects of the cellular/wireless service provider in mobile wallet?

Nespola: With their ownership of the distribution channel and the service customer relationship, wireless carriers can be a key wedge in establishing which mobile wallet standard becomes widely adopted – and which doesn’t. In addition, there are opportunities for wireless carriers to capture revenue all along the mobile payments value chain.

What do you see as the role and prospects of Google in mobile wallet?

Nespola: Google is uniquely positioned to appeal to retailers because of its no-fee model. But as Google has often found, offering a great product and getting widespread adoption are not the same thing. It remains to be seen how much credit card companies and banks will embrace Google Wallet.

What do you see as the role and prospects of online retailers like Amazon and eBay (News - Alert) in mobile wallet?

Nespola: Amazon has already started encouraging customers to use its price-check app to compare brick-and-mortar book prices with its online prices, which are inevitably lower. I wouldn’t be surprised to see apps like this develop into more robust instant purchase systems.

What do you see as the role and prospects of traditional bricks-and-mortar businesses in mobile wallet?

Nespola: Brick-and-mortar retailers in some ways have no choice. Accepting payments by smartphone will become standard operating procedure during the ‘10s in the same way accepting payments by credit card became SOP during the ‘80s.

But it could present additional opportunities for retailers to increase consumer spend by linking mobile wallets to loyalty programs or using the consumer information gathered from mobile purchases to offer mobile ads or mobile coupons. Tap-and-pay can also potentially speed up the purchasing process, a benefit for busy nights at the supermarket or shopping at malls during the holiday season.

What do you see as the role and prospects of advertising firms in mobile wallet?

Nespola: The holy grail of mobile advertising is location-based advertising. But consumer concerns over Big Brother-like knowledge of their whereabouts have inhibited its development. This will be doubly the case with credit cards, which consumers are especially sensitive about. Mobile advertising linked to the data gathered from mobile payments will eventually come, but it will take some time, and there will be some stumbles.

What is the status of mobile wallet availability today in the U.S.?

Nespola: True mobile wallet functionality is currently only available to owners of Google Wallet-enabled Samsung Nexus S, although readers are available at more than 150,000 retailers. The story will likely be a lot different by the end of 2012.

Abroad?

Nespola: Japan is really at the front lines of mobile wallet. The Japanese mobile wallet system, Felica, is based on radio frequency identification (RFID) technology, and has been around since 2004. About half of Japanese mobile phone users have phones compatible with the system.

What needs to happen for mobile wallet to reach a tipping point in the U.S.?

Nespola: One retail sector will likely lead the way to establish trust and faith in mobile payment systems. Top candidates include convenience stores, vending machines and public transport card dispensers.

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