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Why are we racing to build mobile wallets?

I was at an industry conference recently that focused entirely on mobile wallets, listening to presenters from various industries talk about the future of mobile wallets. One thing is for sure: Nobody has any idea how and even if a mobile wallet will ever become widely used.

Banks are building mobile wallets, mainly out of fear of losing touch with their customers. They don’t know what market opportunity the wallet will solve but they will have a solution in the market. Many are building a solution simply to say they were first to market.

Third-party developers funded by risk-taking venture capitalists are building wallets in the hopes of becoming the next PayPal.

Banks and vendors are arguing over the technology that will support a wallet, near-field communication (NFC) or QR codes. They are both making the assumption that consumers are excited about making a payment on their mobile device at traditional checkout counters. I have yet to see or know a customer who wants to make a payment and is actively seeking cool new technology to leverage. Have you?

What banks and third-party developers have forgotten about is the customer and the merchant. Both are designing solutions that add little value to a customer’s daily routine. Each point to research that indicates that customers are more willing to leave home without their wallets than their phones. Why would you leave home without your communication device that connects you to your world? When I leave home, I am definitely not thinking about how I am going to pay for lunch, but rather what device I am going to use to read the morning news and see how my baseball team did last night. And no company has yet developed a mobile wallet that will help merchants move customers through a checkout faster or increase sales.

Don’t get me wrong. I think that we will eventually move to a world where our mobile phones will allow us to manage our financial lives. But having a mobile wallet for the sake of having a wallet, without understanding what the customer needs and developing a value proposition for merchants that are a leading force in encouraging adoption is like creating a cutting-edge solution for a non-existent problem.

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Comments: (4)

Melvin Haskins
Melvin Haskins - Haston International Limited - 24 May, 2013, 07:33Be the first to give this comment the thumbs up 0 likes

In paying for long term parking a year ago in a city that I had never visited before I was able to pay using my mobile device by texting my car registration number followed by the parking space number to the parking lot manangement company. The fee was charged to my mobile device account. No bank was involved. I would welcome doing the same at any parking meter or parking lot.

Why do we need wallets? Who needs a bank? Why not charge direct to the mobile device account?

A Finextra member
A Finextra member 28 May, 2013, 14:45Be the first to give this comment the thumbs up 0 likes

There are a few reasons... mobile companies are incented towards people spending their money on their services (talk, content, etc) on which they have much more margin than on payments (the difference is about an order of magnitude - 10x).

Also, if you start putting higher-value items on a mobile bill (which is paid monthly) the telcos would suddenly become short-term lenders on a much larger scale than they are probably comfortable with...

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 28 May, 2013, 17:17Be the first to give this comment the thumbs up 0 likes

Paying for parking with a mobile phone is certainly a great use case for GYMPS / Carrier Billing mobile payment although it doesn't qualify as a mobile wallet in the strictest sense of the term. Leaving that aside, MNOs charge merchants as much as 20% transaction fees for Carrier Billing, which explains why it hasn't become so ubiquituous, as I'd highlighted in this Finextra post:

Banks Have Nothing To Fear From TELCOs

Andrew Rothwell
Andrew Rothwell - House of Mozz - Sydney 29 May, 2013, 00:23Be the first to give this comment the thumbs up 0 likes

I couldn't agree more with the sentiment that mobile wallets and associated applications are not well understood; in terms of customer, merchant and bank interaction, and therefore usage.

We have spent much time discussing consumer engagement models in different market segments (hopsitality - the obvious one, medical, fashion retail, etc), where behaviours, actors and interactions are different. We have discussed standalone payment apps, payment apps combined with loyalty, loyalty + payment + social, etc.

And we've come to the conclusion that we must follow the path of utter simplicity. Everything comes back to how I can make the punter's life easier. Making their relationship closer and more cool between the customer and merchant(s) isn't necessarily the winning ticket.