MasterCard has just joined Visa, Google, PayPal, Isis, O2 and a whole string of providers who are launching or preparing digital or mobile wallets. As frontiers between the online and physical worlds start to blur, digital wallets will play an increasingly important role for both consumers and merchants. For consumers, the digital wallet can be a convenient shopping tool involving multiple channels and multiple worlds – think Internet + Social + Local + Mobile. For merchants, digital wallets represent a clear-cut, constant entry point to reach out to digital consumers regardless of whether they are offline or online.

A digital Swiss army penknife

The content of a physical wallet provides an endless list of items that could be digitized including: ID cards, loyalty and gift cards, receipts, vouchers and credit cards as well as preferred places, products and people. Combine this with tracking consumers’ online, mobile and social media activities and you get an idea of how ‘fat’ a digital wallet could be.

With so many capabilities packed into the digital wallet, it may soon become the digital equivalent of a Swiss army penknife when it comes to flexibility and convenience. As long as the Swiss army penknife does the job as well as a heavy carving knife, people will use it.  The convenience of each of the various capabilities of a digital wallet will definitely drive adoption by consumers, who may revert to physical wallets or choose specific digital wallets better adapted to specific situations.

Finally, digital wallets that are actively used by consumers will provide a genuine and original source of rich information on a customer’s history, profile and future activity. This in turn will force marketers to rethink the way they reach out to consumers.

Marketing 3.0

With the internet, old marketing techniques evolved, became more sophisticated and can now be applied to mobile. Thanks to digital wallets, marketers (in merchants, brands, manufacturers, financial institutions) can use refined marketing techniques to reach out to customers before, during and after their shopping via multiple channels.

For example, revamped direct mailing techniques would see marketers sending virtual credit card offers or newsletters directly into the consumers’ digital wallet.

New marketing techniques could see consumers creating and saving shopping lists in their digital wallets which would encourage firms to provide them with the appropriate offers for goods and services in a timely manner. This is an inversion of the current status quo where consumers spend time and effort looking for the best deal. Marketers will be the ones browsing through thousands of digital wallets and analyzing them for opportunities to drop in relevant promotions.

Digital wallets will therefore serve to satisfy the rising “on-demand” generation who expect everything right here, right now. Facebook showed us how the Y generation was ready to share everything on social media. My guess is that the “on-demand” generation would make the “public” space of their wallets completely accessible for promotions or solicitations from brands, merchants and influencers.

Flexibility as the recipe for success

In order for a digital wallet to take off, providers must ensure that it is easy to use, truly convenient and that it will meet the security and privacy requirements of both consumers and the regulators.

Of the dozens of companies trying to implement their digital and mobile wallets, the winners will surely be the ones that make the lives of consumers and merchants easier. I am almost certain that we will see the emergence of a new Google or Facebook in this space. The right provider will provide consumers with a very fluid way to open close or share their wallets and also enable highly targeted marketing techniques for marketers to connect with digital consumers.