The Promise of the Mobile Wallet
Mobile payments are slowly making inroads into consumers pockets. Although we are still waiting for widespread adoption of mobile payments in the US (e.g. see NY Times recent article) there are many players in the space, representing a wide range of industries. From tech companies to banks to mobile carriers to retailers, the list of companies and services vying for position continues to grow. Some are making money - PayPal, a market leader, saw $11B in mobile transactions in the most recent quarter, representing almost 20% of their transactions. Starbucks saw an (unofficial) estimated $1B in mobile payment revenues in 2013. While others are planning their entrance - it is a pretty safe bet that Apple will soon be entering the mobile payments scene beyond their physical and virtual stores. Or getting started - last year Facebook added the ability to make a payment right from your Facebook page.
Its not hard to put mobile payments in a chicken and egg category - the ubiquitous systems won’t get established until there is a critical mass of users, but users (and merchants) won’t adopt until the systems are established. However, consumers aren’t necessarily comprehending the added value of shifting payments to the phone, requiring considerable effort to sell the idea of better streamlined money transfers (while also providing more targeted marketing opportunities.)
Focusing only on mobile payments as a replacement for plastic is shortsighted. Mobile payments are primarily being positioned as supporting easier and faster currency transfers. You could argue that they benefit from added transactional security and that the mobile phone can be locked-down or erased if lost, saving the user the hassle of canceling and having multiple cards reissued. These are all great attributes, and are distinct advantages over a wallet full of plastic cards with exposed account numbers.
But there is a greater set of advantages that effectively deprecate the analog wallet and provide greater value to the consumer. This list includes integrated loyalty programs, coupon management, location-based offers, personal finance management tools, and real-time connect with your bank to provide real-time payment functionality. And it's not simply the accumulation of all of these things in one place - the smartphone. Rather, it is the interaction between all of these elements and the subsequent valuable consumer insights that this functional and data-rich interaction creates. For example, the wallet could let me know that, as I walk by my favorite store, that they are having a sale, I have an unused rewards credit, and I’m within my clothing budget for the month.
It is this interaction that will ultimately pay off the value of the mobile wallet and allow consumers to make better decisions about their money. This can help customers change behavior and (potentially) be in a better position to be smarter money managers, not just better money transactors. Marketing will inevitably need to be more targeted, but once we gain critical infrastructural mass and warm consumers up to the value of the smartphone as their central financial organizer, the mobile wallet will become a true disruptor in consumers lives.
First published on LinkedIn.
Image via Veer