Countless analysts have tried to diagnose what ails the lackluster U.S. mobile-wallet market, but new observations from securities rating agency Fitch Ratings Inc. succinctly identify three primary causes: a lack of compelling value propositions, an overcrowded market, and cyber-risk aversion on the part of consumers.


“The vast majority of mobile wallets have thus far been unable to offer an effective value proposition to consumers in the form of checkout speed and/or financial incentives such as merchandise discounts,” Michael Taiano, a director at New York City-based Fitch, says in a blog post. “Likewise, there does not appear to be a tangible financial benefit for merchants relative to the costs of accepting card-based payments, such as interchange fees and point-of-sale terminal installations.”


At the same time, the introduction of numerous mobile wallets into the marketplace (Citigroup Inc. joined the crowd just last week with Citi Pay) “has created added confusion for consumers as it relates to acceptance of the various wallets at the checkout line,” Taiano says.


And regarding security, Taiano’s post says, “Fitch believes that users are concerned with potential security risks of maintaining their card account information within their mobile device, although providers have made significant efforts to address these concerns by touting their enhanced security features such as tokenization.”


Taiano’s post reviews the slow adoption of Apple Inc.’s much-touted Apple Pay mobile wallet as well as the demise of Merchant Customer Exchange’s CurrentC wallet and the Softcard wallet sponsored by several big telecommunications firms.


Like other analysts, Taiano points to Starbucks Corp.'s wallet, a closed-loop service, as a major exception. The Seattle-based coffee purveyor reported Nov. 3 that 25% of its U.S. transactions now come from mobile devices, up from 20% a year ago.


“Starbucks’s mobile-payment app adds value to the customer experience by reducing customers’ time spent waiting in line by allowing them to order/pay before entering the store, and also provides electronic storage for the reward points they earn for each purchase,” says Taiano. “Further, customer usage is encouraged and incentivized by Starbucks, and cyber-security concerns are reduced given the payment app is limited to Starbucks stores.”


The background of general-purpose mobile wallets’ adoption so far is the still-limited penetration of e-commerce, which despite big growth still accounts for just 8% of U.S. retail sales, the Fitch post notes, citing U.S. Census Bureau data.


For now, wallet purveyors probably can find more fertile fields overseas, especially in Africa and Asia where cash still dominates.


“In this regard, mobile-wallet adoption does not have to overcome the established payment infrastructure and relative convenience of cards exhibited in the U.S. and other developed countries,” says Taiano. “A case in point is Apple Pay, where despite launching first in the U.S., the majority of Apple Pay’s transactions now come from non-U.S. markets.”


According to press reports from India, the country’s Patym mobile wallet is booming because of the government’s decision to cancel the 500 Rupee and 1,000 Rupee ($7.37 and $14.75, respectively) notes this month. The notes are being replaced, but the abrupt cancellation of the old ones took out of circulation 86% of India’s currency by value and 24% by volume, Bloomberg Media’s BloombergQuint news service reported.