• by Mark Walsh  @markfwal, August 3, 2012

The mobile wallet wars are heating up again.

Isis, the m-payments initiative formed by Verizon Wireless, AT&T and T-Mobile USA is expected to kick off consumer trials in Salt Lake City and Austin later this month. Apple is rolling out its own wallet entry with the Passbook feature in iOS 6. Google says users can now add any debit or credit card to their Google Wallet app.

That's not to mention mobile wallet ventures being prepped by Microsoft, PayPal, MasterCard, Visa and others. What's it all leading to?

A pair of new reports from Forrester focusing on the emerging m-payments space conclude Near Field Communications (NFC) -- the key technology behind many planned digital wallets -- is still several years away from going mainstream.

Competing technologies that don't require embedded NFC chips in handsets aim to fill the void by offering m-payments solutions that pose few hurdles for consumers and merchants. Whether NFC or other approaches, Forrester maintains thar the winning wallets will be those that provide value to consumers beyond just payments.

The research firm acknowledges that NFC is emerging as the standard for mobile contactless payments, with the shipments of NFC devices expected to double to 100 million this year.

Despite these developments, and NFC-focused projects like Isis and Google Wallet, Forrester doesn't expect the technology to hit critical mass -- more than 15% to 25% of the population -- for several years. In the U.S., the research firm projects that a quarter of consumers will have NFC-enabled phones by 2016.

What's the holdup? The replacement cycle for NFC phones will take at least two more years as people upgrade to new devices.

Furthermore, Forrester analyst Thomas Husson argues in his report, “NFC: WhatLies Behind Contactless Payments,” that current payment options like cash and credit/debit cards aren't broken. NFC-based payments may make that experience only marginally more convenient. He also notes that the technology needs better marketing.

In the interim, a number of players are banking on mobile wallets that don't rely on overhauling phone hardware and point-of-sale (POS) systems. Leading the way is eBay unit PayPal. Last year it introduced integration POS integration at Home Depot and this year launched a cloud-based mobile payment solution in partnership with Erply.

MaserCard and Visa are rolling out PayPal-like digital payment services, aiming to establish digital wallets online before extending them to in-store checkouts. Startups like LevelUp and Square providing payment and loyalty benefits via mobile apps used in-store.

Beyond that are branded offerings, such as Starbucks' mobile payments app, that rely on white-label wallet solutions from vendors like mFoundry and Paydient.

Whether NFC or an alternative payments approach, Forrester analyst Denee Carrington in her report, “Why the Digital Wallet Wars Matter,” emphasizes the offering must be convenient and contextual to succeed.

That means it has to be at least as convenient as a traditional credit card and offer at least one other commerce feature, like loyalty rewards. In addition, a mobile wallet should deliver personalized content and services and a compelling interface to keep users coming back to it.

Also, being able to waving a phone over an NFC-tagged product will also open up new marketing opportunities and be more convenient than QR codes. NFC could also be applied to other things from mass transit access to content-sharing.