Home  › Media › Mobile

Digital Wallets Beyond the Money

  |  April 19, 2012   |  Comments

How the clash of old businesses and new technologies could derail mobile payments.

"It must be remembered that there is nothing more difficult to plan, more doubtful of success, nor more dangerous to manage than the creation of a new system. For the initiator has the enmity of all who would profit by the preservation of the old institutions and merely lukewarm defenders in those who would gain by the new ones." - Machiavelli's, "The Prince"

For those seeking to play a role in the incipient mobile wallet space - from carriers to software companies to hardware manufacturers - take note of Machiavelli's counsel to royals in Europe on the dangers of creating new orders. Visa, MasterCard, American Express, and Discover represent those wanting to "preserve" existing business models. Carriers, Internet companies, and a plethora of others want to take money away from the incumbents. But before either goes to battle against the other, a few matters must be addressed first:

  • Retailers must be convinced to play ball with any changes to existing processes.
  • New ecosystems and processes must be created and secured in the digital world.
  • Of course, let us not forget the ultimate user, the consumer.

The first challenge involves retailers. From the big boys like Target and Walmart to the small fries like a neighborhood dry cleaner, transaction fees related to mobile wallets represent significant costs for retailers. For decades, retailers have sought to lower their transaction fees. Enter the promise of mobile wallets - finally, a way for retailers to lower their costs, or so they thought. However, that hasn't been the case for some time. To date, no one is giving retailers a break on transaction fees. Whether it is ISIS, Google Wallet, Amazon, or PayPal, the fees are just being passed on to the retailers. That is not what retailers expected, and why many are just sitting it out right now.

Compounding the problem for retailers is the need to upgrade their POS (point of sales) systems or back-end infrastructure to support NFC (near-field communication) or cloud-based solutions. Google, for one, offers to subsidize the cost of these upgrades, but at the expense of sharing customer data, something retailers are reluctant to do. Who is going to lay out this capital expense for the promise of mobile wallets, as opposed to a firm commitment of a lower transaction fee?

The second challenge for mobile wallet entrants is the layers of complexity involved in creating a cohesive mobile payments ecosystem. For both the cloud and the NFC space, creating a comprehensive ecosystem is not a simple endeavor. When one examines what it takes to create a mobile wallet network, as many as nine moving parts must be cobbled together to support a payment from a mobile device to a retailer. Then there is the trust factor, convincing businesses and consumers alike that their digital money and information is safe in a digital wallet. The more complex the ecosystem, the more potential for a weak link somewhere in the chain.

Lastly, and perhaps the most pressing challenge, is that of consumer behavior. While getting rid of the Costanza wallet may be good for your back, swiping a card is pretty frictionless, so many consumers don't currently see the benefit of waving a phone over a POS or opening an app on the phone to complete a transaction. Moreover, people want to know exactly what they are getting if they do use a mobile wallet. Right now, there isn't a consistent user experience. Today, one retailer might have tap and pay, another may display coupons upon tapping, and yet another may pose a challenge question like asking for one's PIN.

These challenges are not insurmountable. Industry players in the NFC and cloud space must win over the retailers by lowering transaction fees, creating an ecosystem broad enough to cover as many consumers as possible yet tight enough to be considered safe and trustworthy, and convincing consumers that it indeed is to their benefit to use a phone as a wallet. Otherwise - and unfortunately for the mobile wallet industry - Machiavelli's premonition may come to pass.

ClickZ Live Toronto Twitter Canada MD Kirstine Stewart to Keynote Toronto
ClickZ Live Toronto (May 14-16) is a new event addressing the rapidly changing landscape that digital marketers face. The agenda focuses on customer engagement and attaining maximum ROI through online marketing efforts across paid, owned & earned media. Register now and save!


Daniel Israel

As the strategy lead of SapientNitro's mobile practice, Dan assists clients in developing their mobile strategies, from apps to mobile web to marketing-focused initiatives. His experience encompasses mobile and multi-channel approaches for retailers and other consumer-facing companies.

Dan joins SapientNitro after several years as a leader in the mobile space. Most recently, he led consumer mobile strategy and mobile product management at The Home Depot where he launched an overhaul of the mobile website as well as an app for the iPhone, Android, and Windows Phone 7. The launches have garnered accolades from the media, and Forrester Research referenced the app in a "Mobile Technographics: US Online Shoppers" report as "one example of a company that has well matched its mobile services to this (home goods) category."

Prior to The Home Depot, Dan spent almost nine years at BellSouth, Cingular, and AT&T Mobility. He concentrated on broadband and mobile applications for the consumer and business segments. Dan also has start-up experience from his days as one of the founders of Incanta. The turnkey broadband applications company raised $22 million over three rounds.

Dan has a BA from Emory University, an MSc from the London School of Economics, and an MBA from the University of Michigan. He has lived abroad three times in his life: Tehran, Iran in 1975-1976; London, England in 1990-1991; and Kagoshima, Japan in 1992-1993.

COMMENTSCommenting policy

comments powered by Disqus

Get ClickZ Media newsletters delivered right to your inbox. Subscribe today!



Featured White Papers

ion Interactive Marketing Apps for Landing Pages White Paper

Marketing Apps for Landing Pages White Paper
Marketing apps can elevate a formulaic landing page into a highly interactive user experience. Learn how to turn your static content into exciting marketing apps.

eMarketer: Redefining Mobile-Only Users: Millions Selectively Avoid the Desktop

Redefining 'Mobile-Only' Users: Millions Selectively Avoid the Desktop
A new breed of selective mobile-only consumers has emerged. What are the demos of these users and how and where can marketers reach them?


    • Contact Center Professional
      Contact Center Professional (TCC: The Contact Center) - Hunt ValleyLooking to join a workforce that prides themselves on being routine and keeping...
    • Recruitment and Team Building Ambassador
      Recruitment and Team Building Ambassador (Agora Inc.) - BaltimoreAgora, www.agora-inc.com, continues to expand! In order to meet the needs of our...
    • Design and Publishing Specialist
      Design and Publishing Specialist (Bonner and Partners) - BaltimoreIf you’re a hungry self-starter, creative, organized and have an extreme...