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Mobile wallet: lessons from Steve Jobs

I was invited to participate in the "Mobile wallets" panel at the Europe's Customer Festival. I don't exactly know what we will be discussing as the truth is: there are no mobile wallets...

There are individual single-issuer apps; there are generic empty "containers"; there are "walled gardens"; but there are no true mobile wallets as such. The closest attempt was made by Google - they even tried to extend their pure mobile wallet to the physical world via a card (smart move!). However, they were shot in the knee...

What is a killer mobile wallet?
Mobile payments industry should learn lessons from the successful mobile music industry. Let's look at Apple's iPod - after all, it defines and owns the "mobile music" category.

iPod is all about unparalleled user experience. It's (a) open - iPod owner (and not Apple or record companies or somebody else) decides what nonpirated music is stored on it, (b) flexible - music can be downloaded from iTunes or CDs; and (c) ubiquitous - iTunes allows you to buy almost any music you want.

[As a side note, it took Apple - and Steve Jobs personally - incredible effort and dedication to deliver that user experience.]*

Open, flexible, ubiquitous
To become the turning point in mobile payments, the killer mobile wallet has to be similar to iPod+iTunes: (a) open - it's the consumer, i.e. wallet owner (and not a bank, mobile operator or handset manufacturer) who should be able to decide what goes into his/her wallet; (b) flexible - we store much more than just payment cards in our wallets (think of receipts, for example) and, most importantly, (c) ubiquitous.

As for "open", have a closer look at what MasterPass has to offer, especially in physical retail. "Flexible": that requires merchants to move away from physical receipts and physical loyalty cards - consumer made it clear that's what they want/expect; some good solutions for all that are already available (btw, MasterPass is one of them, to a degree). "Ubiquitous" is the simplest task - please read on.

Who is capable of developing the killer mobile wallet?
Not banks - they are too big and slow, too narrow-minded, and they don't work well in a group (after all, mobile wallet is a multi-issuer product); not mobile operators - they are simply not part of the equation (the same goes for Apple, Google, Facebook et al.) If someone stands a chance, it has to be an entity connected or related to merchants. Not the acquirers - too many of them, and in direct competition with each other.

And the winner is...
EMV, i.e. Visa, MasterCard, Amex and China Union Pay. They control the "rails" between the retailers and the issuers. If they do unite (to prevent "contactless EMV madness" situation from happening again), they can build a truly open and ubiquitous mobile wallet. Worldwide. Most importantly - they can do that using existing infrastructure!

The secret sauce
It's dead simple: a physical uber-card with EMV-owned 16-digit token. Talking about ubiquity - there are over 50m retail outlets worldwide that accept payment cards.

That physical uber-card is controlled via the "mobile wallet" app. Simples!

How it works
Consumer registers his/her bank cards with the mobile wallet; then it's "business as usual", both for the consumer and the retailer - no change of habit or modus operandi.

Via a mobile app, consumer chooses one of the registered bank cards for a given transaction - just as you would with a conventional leather wallet. Consumer then presents the physical uber-card - again, a familiar step, both for the consumer and the retailer. Transaction is routed to the corresponding scheme first where the uber-card's token is mapped to the bank card which consumer chose for that transaction during the previous step. Details of that chosen bank card are then sent to the appropriate issuer in the normal way. The transactions are treated as "cardholder present" (rates/rules is the EMV's call).

The killer mobile wallet
A smartphone and a single physical card, that's your iTunes and iPod. Open, ubiquitous, simple and convenient. What's not to love?


* According to Walter Isaacson, to ensure that no other company could replicate iPod, Apple signed an exclusive deal with Toshiba - at that time, the only manufacturer of miniature hard drives suited for that application.

To secure industry's participation (i.e. content), Jobs personally courted and sweat-talked record companies into agreeing to sell music via his platform.

When they agreed, the task was far from over. Jobs knew that to succeed he had to offer music as individual tracks, not as albums. Resistance from the music industry was huge. Even after Jobs managed to overcome the objections of record companies, he still had to seek personal consent from individual artists too to split up the albums.

He personally (!) persuaded top artists including Madonna, Bono, Mick Jagger and Dr Dre. He even met with "niche" musicians, such as trumpeter Wynton Marsalis.

Only then Apple was able to deliver the "turning point for the music industry", to use Jobs' own words. Following the launch, even Apple expected to sell one million songs in six months. They sold a million songs in six... days. 


Comments: (7)

Matt Scott
Matt Scott - RenovITe Technologies Inc - London 02 September, 2013, 15:26Be the first to give this comment the thumbs up 0 likes

We still need greater collaboration between Financial Institutions, Telecommunication Network Providers and Handset Manufacturers - when (rather than if) that is achieved - then we can expect to see mass roll out of Mobile Wallets.  At the moment the only players in the market are niche applications.  There needs to be a wake up call soon - otherwise the only Mobile "Wallet" Issuers will be Merchants - rather than traditional FI's.

A Finextra member
A Finextra member 02 September, 2013, 15:41Be the first to give this comment the thumbs up 0 likes

That's the whole point, Matt - a single issuer cannot provide an open m-wallet as the latter must be a multi-issuer product. Were Barclays, for example, issue and manage an open m-wallet they would not be thrilled at all if the "top of wallet" card was not one of theirs. Hence, the inherent conflict of interests...

As for the mobile operators, they could have offered value in authentication, but they missed the boat as there are reliable ways to authenticate a mobile user without involving MNOs - Barclays Pingit is a good example of that. Also, if m-wallet is fronted by EMV uber-card, authentication is done via chip&PIN.


A Finextra member
A Finextra member 03 September, 2013, 09:06Be the first to give this comment the thumbs up 0 likes

My mobile wallet is open, flexible, ubiquitous and simple too. The underlying OS is proven since many centuries, but has meanwhile been enhanced to support not only cash but also payments cards (incl. EMV), ID cards, coupons and whathaveyou. Furthermore it is pretty failsafe, not impacted by an empty battery, loss of signal or some infrastructure failure at a wireless communications carrier.

A caveat - it is only open unless the leather strap is closed.

While one can fully understand the desire to make money by introducing even more fancy new payment schemes revolving around smartphones, reality shows that the desire of the average person to use those new fancy payment schemes isn't too overwhelming. Also, the "show off" effect is now getting weaker as we approach smartphone market saturation. Maybe it is now about time to think about those upcoming smart watches, and how to lure trendsetters into paying via those ?   (;-))

A Finextra member
A Finextra member 03 September, 2013, 09:26Be the first to give this comment the thumbs up 0 likes

Dear Anon, that was precisely my point: to be successful, mobile wallet needs to replicate most (if not all) functions of that leather "suitcase" of yours. Do we need to even bother? Well, you do have payment cards, even though cash "works just fine"...

Mobile wallet (and smartwatches) is not about payments or making money - the latter is a (positive) side-effect of any product that strikes consumers' hearts. It's all about convenience, flexibility and choice. In other words - "user experience" (sorry if I sound lecturing - I talk to my 3&5 a lot).

As for "showing off", I'd rather my trousers bulged in just one place, not two... :)


A Finextra member
A Finextra member 03 September, 2013, 10:43Be the first to give this comment the thumbs up 0 likes

Exactly, it is about choice - and it seems that consumers are somewhat less eager to adopt electronic wallets than they were lets say, in adopting social networks like Facebook. The primary wallet function - supporting payments - has now been offered since a few years on smartphones, with a large number of pilot projects but no overwhelming success so far. Including more functionalities (eg. ID cards) is complicated and makes the product more complicated, not sure how this can increase attractiveness.

It might turn out that having cash and prepaid cards for the usual small purchases done from people and vending machines, plus credit and debit cards for somewhat higher amounts to be used in card present / card not present payment situations might be just the right mix for most people. Having to pay is a necessity, but not really entertaining or a source of fun ... so as there are globally established methods working reasonably well, the added value of introducing an electronic wallet into the process isn't obvious to everybody.

Leveraging the customer's mobile phone as a means for two factor authentication is a different story, but this aspect would be driven by the banks/retailers, not by the consumers. In fact, "dumb" mobile phones are better for this than smartphones, as they are much more difficult to hack. And even the NSA would have significant difficulties to spy on a leather wallet via the Internet.

Not going to elaborate further on what bulges my trousers, I can disclose that my smartphone slips into my shirtpocket ...   (;-))

A Finextra member
A Finextra member 03 September, 2013, 11:50Be the first to give this comment the thumbs up 0 likes

Unless it's Blackberry or you only sit/stand straight, most smartphones would easily slip out of a typical shirtpocket...

On a serious note, wallet is not about payments - you have cards for that. Wallet is an interface and a container. If you lose your leather wallet, it's gone and you are exposed. If you lose a smart wallet, it's a different story. 

2FA, coupons, loyalty etc. - it will take time to bring all the parties onboard, but it's the question of "when", not "if"... Even London cabbies warmed up to Hailo - unthinkable even 5 years ago. The world is changing (fast).

A Finextra member
A Finextra member 03 September, 2013, 12:41Be the first to give this comment the thumbs up 0 likes

Time will tell whether electronic wallets will become a widespread success. Many years ago when the first chip cards did show up on the market, quite a few people did envision a "all-in-one" smart card for all purposes in life, from payments over passport/legal ID, drivers license, healtcare ID, loyalty schemes and up to membership ID for whatever clubs you might join. As we know, these dreams did not materialize - mainly for organizational, cost and privacy reasons.

To me, designing better shirtpockets that prevent smartphones from slipping out seems somewhat easier than designing that universal electronic wallet. But again, time will tell.

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19 Mar 2009


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