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Target is the latest retailer to experiment with its own mobile wallet.
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Target thinks it has enough customer trust to get into the mobile wallet game

By Ashley Rodriguez & Ian Kar

Banks and tech companies are battling to become consumers’ preferred mobile wallet of choice. Now, retailers like Target—which has a troubled history when it comes to data security—are entering the fray.

Target is reportedly developing a mobile wallet that customers can use to pay for goods with their smartphones, according to three unnamed sources who spoke to Reuters. The retailer—America’s fourth largest—is thinking about launching the product in the US in 2016, but it’s “too early to predict” when it will roll out to the public, Reuters said. The report did not specify if the wallet would only work at its stores or elsewhere as well. 

The big-box chain told Quartz it is considering a number of mobile-payment services in addition to the wallet, such as Apple Pay and CurrentC, the payment app developed by Merchant Customer Exchange, a consortium of retailers, including Target.

If the Minneapolis, Minnesota-based retailer forges ahead with the mobile wallet, the big question is whether it has restored enough trust with consumers to get them to use it. Target suffered a massive data breach in 2013 that affected 70 million Americans. And earlier this week, the retailer was reportedly the victim of another cyber attack that compromised the personal data in its gift-registry app, including names, addresses, and email addresses.

“The biggest issue is perception,” Cherian Abraham, mobile payments and commerce lead at Experian, told Quartz. “Target will have to justify its strategy when developing a new payment product because of the major breach in 2013, irrespective of the fact that they won’t be doing anything different than other mobile wallets, and the product most likely won’t be any riskier.”

A Target spokesperson declined to comment on the security plans for the mobile wallet, but stressed that the 2013 and gift-registry data breaches were very different – in one, payment information and other personal data was compromised in-store at the point-of-sale, and in the other, no payment information was put at risk.

The company said it is thinking about using QR codes—similar to barcodes—to carry out payments, according to the Reuter’s report. Such a method offers the same security as a regular online purchase. Apple Pay, Android Pay, and Samsung Pay, on the other hand, use tap-and-pay technology and tokenization, which is more secure. That technology is integrated into the mobile device, making it more difficult for third-parties like retailers to access, thanks to Apple’s restrictions.

Other retailers have also been exploring mobile-wallet technology as a way to increase customer loyalty.

Earlier this month, Walmart announced Walmart Pay—a payment product that lives within the Walmart app, which is used by 22 million people every month.

Quartz also confirmed that Kohl’s plans to release a payment service called Kohl’s Pay in the fall of 2016 that would be part of the retailer’s existing app. Its app already includes a wallet where customers can store Kohl’s cash, or rewards earned on purchases; promotional offers; loyalty points earned through Kohl’s Yes2You Rewards program; gift cards; and the Kohl’s store-branded credit card, which has 25 million active cardholders. The only thing missing is payments, the retailer said, although Kohl’s does partner with Apple Pay.

“If we bring Kohl’s Pay into that, with one click or scan or tap, we can put everything into the [point-of-sale] system—payment, offers, loyalty, everything,” similar to the way the app works with Apple Pay, said Ratnakar Lavu, Kohl’s executive vice president of digital technology, at a recent press briefing.

Kohl’s Pay would give customers a similar payment experience, whether or not they use products like Android and Apple Pay, Lavu added. “We’re supporting both and that’s how we think we’re going to win in the marketplace,” he said.

The bet might pan out for retailers—Starbucks launched its mobile wallet three years ago, and now 21% of all its sales come through mobile devices.