Mobile Wallets - Hype Or The Real Thing?!
Are mobile wallets real or wishful thinking?! The topic of
digital wallets has been discussed for years, with
projections of billions of dollars and all kinds of convenient and
fancy features. So what is it, and is it still in the future,
it already here? Here you'll find a discussion that should
clear up confusion, and and answer questions that many people have
asked me over the years.
What Are Mobile Wireless Wallets?
Interestingly, this is the most interesting question of them
all! What defines a mobile (wireless) wallet is still largely
and, believe it or not, has no real generally accepted
definition! Some will say that one, some, or all of the
following are needed in the definition:
- It must be used to pay for
- It should store all of our
payment information, including credit cards, debit cards, and bank
- It should store all of our
- It needs to be able to pay
for bills (ex. utilities, cable, cell phone, etc.).
- It should include technology
that enables wireless payments at point of sale (ex. NFC = Near Field
- It needs to be highly secure.
- It needs to replace the need to carry a physical wallet.
Reviewing this list, I can see how coming up with a clear definition
could get controversial to say the least. For me, I can keep
it simple by saying that mobile wallets should include ALL of these
features, whether or not people choose to use them. It should
essentially allow me to leave my wallet at home, and yet still be able
to transact using my phone for everyday transactions.
Extended capabilities like paying bills obviously go beyond replacing a
physical wallet, but are natural (I and dare I say, obvious) extensions
of having payment information stored in an app on the phone, or in the
Do We Need It?
I like the idea of not having to carry around a bunch of
cards. I already try to minimize carrying around
cash so I can charge
everything to get points on my credit cards, however, eliminating
cash and pesky coins altogether sounds
appealing. Is it
a big deal to carry around a wallet; if you're organized, I'd say no,
not at all. Do I like the idea of having to ensure that my
phone always has enough battery power to transact, no; and quite
frankly, I can see the following pain points:
- Battery life anxiety (like range anxiety
for electric cars)
would become a new term, based on a real stress point.
- I can envision being in line at Costco, trying to pry my
phone out of my kid's hands to process a payment,
and the ensuing
tantrum that was never an issue when I had my old-school wallet.
What's The Point?
- I keep a backup credit card in my car for
emergencies. If the entire payment infrastructure moved to
mobile wallets, what would I do if I left my phone at home, or it was
lost, stolen, or broken? There would forever need
to be some
degree of legacy system support, which would mean that complete
elimination of existing payment mechanisms could conceptually never be
eliminated. Perhaps an in-store terminal that I could login
to to access my mobile wallet could be a solution? Or perhaps
tying everything to a biometrics scan (fingerprint or eye scan)?
Do mobile wallets solve a problem like most great products
do? That's debatable. Sure, I could see a number of
conveniences, however, largely, it's kind of like the iPad.
Did the iPad (or any tablet) really solve a problem people were
having? Nope. Does it do anything that much better
than any other device we have access to; not really. Do
millions upon millions of people love iPads and other tablets, and have
made them a part of our daily lives? Yup.
So what's the driving force behind the mobile wallet? This is
simple. It's wireless carriers, banks, and other providers
looking for new revenue models, and new features to keep customers with
them. It's also dozens, if not hundreds, of entrepreneurs
drooling over the thought of the next big thing that they can sell to
PayPal, Google, Microsoft, Amazon, or other massive
companies. So no doubt we will continue to see mobile
wallets being pushed by every entity with which we interact!
One massive driving force behind mobile wallets is actually the desire
by large retailers to avoid paying transaction fees to the likes of
Visa, MasterCard, and American Express. Much of the mobile
payment infrastructure was devised based on circumventing these
entities in order to save money by avoiding these fees. Any
company or product that can offer an alternative payment process is a
How Do Prepaid Debit Cards Fit In?
Many mobile wallet applications currently on the market are nothing
more than Prepaid Debit cards that are tied to virtual bank accounts,
and a mobile application on our phone. In other words,
they've taken the prepaid reloadable debit card concept of more than a
decade ago, added bill pay and check image deposit features, and sold
it to carriers as mobile wallets! That's not to say that's a
bad thing, but let's keep things real and not try to sell people that
this is something new and innovative; people are smarter than that.
Who Are Some Players?
Here's a list of mobile wallet-like products, some of which get closer
to what we might see as a virtual wallet, and others that seem like
standalone storage apps.
* PayPal Mobile
* Android Pay (previously Google Wallet)
* Samsung Pay (acquired SoftCard,
* Apple Pay
There are no doubt other companies trying to get in the game.
Apple was surely the one that injected customer awareness and
legitimacy when it introduced Apple Pay, even though, for the most
part, they simply took what Google was already going with Google
Wallet, and expanded on that. If nothing else, leveraging the
Apple brand has provided a fantastic lift in overall awareness and
penetration of mobile payments.
What About SMS?
There's been a lot of talk about companies, as well as countries,
making use of SMS to process payments. Many wireless carriers
use it to allow you to make payments using a credit card, debit card,
or bank account on file. And some companies/countries allow
users to make purchases and pay bills using SMS. The great
thing about SMS is that it works on any phone. It doesn't
require a special application on your phone, or embedded technology in
your phone or at the point of sale like NFC. Some would even
argue that building out SMS capability could be considered a competitor
to what people are generally leaning towards as mobile wallet
applications. That said, the momentum of NFC payments is
likely to continue, and SMS payments will likely continue to be used
for only very specific targeted purposes.
So What Does The Future Hold?
There's no doubt that as a society we're going to move away from cash,
and we need a slicker means of dealing with the cards in our
wallet. It seems obvious that NFC payments will win out,
despite its slow start.
However, rest assured that it will be 5-10 years before we
see any truly transformational usage. In the
meantime, I'll be keeping my
eye on this market and technology, so please check back for updates!