[Dave Birch] When I was at the CFIR “Remaking Finance” seminar in Copenhagen, I had a little trouble following some of the presentations because they were in Danish. But I managed to follow most of what Per Harald Strom from NETS was saying, because his slides were in English. I really liked his approach even if I didn’t catch all of the nuance. He gave a review of the future finance landscape and punched over a few decent key points to the banks in the audience.

Money. The world is contemplating fundamentals. This rather helpfully led into some points that I made in my talk about whether reaction or revolution will be the result of a failure of confidence in current monetary arrangements.

Knowledge. There is no way that banks can keep up, because the combined knowledge of consumers and merchants easily exceeds theirs. I can imagine a plausible strategy for banks where they determine to curate rather create customer information and stay in the loop. Otherwise what’s to stop Zopa-like enterprises from going around them?

Values. He had a fantastic graphic that I didn’t understand. A Chinese Marxist realist poster with a Red Guard brandishing an Oyster card with a hammer and sickle on it. Progress is socialism plus contactless at point of sale? But he made some interesting points about aligning product and service values with future consumer values, in particular (if I understood it) the fact that future consumers see the virtual and mundane as a spectrum, not as different spheres. He also said that people are generally good, but that may have been about Denmark and not the world in general. At the end he referred back to this slide and said “transferable non-monetary values”, which is what I label “alternative currencies”, so I think we’re on the same page.

Wallets. A man after my own heart, he thinks that wallet wars are looming. Personally, I felt that his vision of a truly consumer-centric e-wallet is unlikely to be realised in the short term, because there are too many other people fighting to provide these wallets and with business models to back them up. In his market, the mobile operators have already made the first move.

The four Danish network operators have banded together to create a standard NFC platform, and admitted that it is the threat from Google that has driven them to do so.

[From Denmark gets its own NFC consortium • The Register]

It was his last point, about mobile wallets, that made me think about his presentation while I was skimming the news feeds this morning. I came across a few more stories about mobile payments that seem to me to reinforce a point I made last year.

The mobile operators are developing wallets, the schemes are developing wallets, Google already has a wallet, Visa in the USA not only has the “V.me” wallet but is building a developer community around it. There’s going to be some competition developing in this space, and even the most rudimentary analysis of the emerging ecosystem would immediately alight on the control issue

[From Not wallet wars, but certainly skirmishes]

If Per’s initial point is correct – that the world is re-examining fundamentals – then perhaps it is a change in control that is the fundamental change that is coming. Control over payments? No. The impending wallet wars are about more than control over the consumers’ payments, they are about control over identity.

For wallets to be truly digital, they must store all cards, including identity cards, as well as access money from ATMs, too.

[From 7 Emerging Payments Themes – Bank Innovation]

So how is it all going? The only wallet out in the US market right now is the Google Wallet. The first “hand on” reports on it are rather positive, as you might expect. Just like DoCoMo in Japan, Google has almost total control over the experience.

I think it’s highly likely that tomorrow’s kids will relegate the wallet to the same anachronistic garbage bin as the floppy disk, cassette tape, and VCR.

[From Google Wallet: Hands On – How Secure Is It? | News & Opinion | PCMag.com]

But behind the scenes, it is already illuminating some of the fundamental tensions.

It seems that Citi, the only issuer backing Google Wallet, opted NOT to share merchant and paid information with Google in the first large scale, tangible mobile payment initiative in history. If that does not reek of mistrust, I don’t know what does.

[From » On the road with Google Wallet Drop Labs]

You can understand why the banks and the payment schemes are naturally little nervous about the relationship with the other stakeholders, particularly stakeholders with control over elements of the infrastructure that are critical to delivering transactions. Will this be the operators? That’s far from obvious.

Google and Apple will gobble mobile wallet market share from carriers such as AT&T, Verizon, Vodafone and others over the next handful of years, according to ABI Research.

[From Google, Apple to Challenge Carriers With Mobile Wallets: ABI – Mobile and Wireless – News & Reviews – eWeek.com]

I’m sure this is a theme that will be covered on this blog over and over again throughout the year, so I don’t want to spend too much time on it here, but I do want to make the point that an analysis that views the wallet wars as financial institutions vs. operators is incomplete. There are others (e.g., retailers, Facebook, brands) who could construct attractive wallet propositions and bring more innovation into the space from unexpected quarters.

These are personal opinions and should not be misunderstood as representing the opinions of
Consult Hyperion or any of its clients or suppliers


One comment

  1. Thank you Dave for nice words regarding the presentation. For the curious audience out there I will point out the following items and clarifications “lost in translation” (although I am fairly impressed with what you picked up).

    1. The above mentioned illustration was from http://www.techdigest.tv/2008/07/oyster_card_hac.html way back in 2008. Your equation is putting to much weight into it, the red army soldier stands as a sign of “revolution” to me.

    2. You got the “alternative currencies” right, as we are able to handle and interact with more and more currencies we might turn to some “stock exhange of one”-type personal bartering, in which what you have, know, own, believe will melt into transferrable currencies.

    3. Rethinking fundamentals. As the next 50 years probably will see a stagnating and fragmenting Europe, a US going through a phase of “I can’t believe we are not the world dominators anymore”, and the return of China to the largest economical power in the World, we will se a radical shift in how we set the rules for the overall financial governance, hence influencing banks and personal economies more directly than we can foresee right now.

    4. Regarding wallet wars – With NFC payments being on the peak of inflated expectations, everybody runs to this new product category from their own starting point (what you refer to as “unexpected quarters”). Hence, the first clash will bear more resemblance to a stampede gone wrong than to an organised war. So could we rename it to “Wallet stampede” instead?

    [Dave Birch] Thank you so much for the clarifications Per Harald, and thank you again for an excellent presentation. Your suggestion is perfect – wallet stampede it is!!

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