[Dave Birch] A typically excellent piece by Karen Webster over at pymnts.com surveys the mobile wallet landscape. She concludes by suggesting that consolidation is inevitable.

But I am going to lay down a wager that consumers will have only a handful of icons on their phones that connect to a single-tender type (payment app) or a wallet (multi tender types) and that merchants accept payment with mobile only for a few of these icons.

[From Commentary – Karen Webster Sizes Up the Rapidly Changing World of Mobile Payments | PYMNTS.com]

I’m sure she’s right. I might be tempted to further and say that they will only have one mobile wallet. Personally, I can’t wait. The idea of taking all of your payment cards, loyalty cards, money, ID documents and such like and chucking them all into some sort of mobile wallet in your handy device-formerly-known-as-the-mobile-phone is most appealing. Indeed, as Karen notes, mobile wallets are all the rage at the moment. Visa has one called “V.Me”. Google has one. The US telcos have got together with some of the card issuers there to make “Isis”. Square has its “CardCase”. And there’s an elephant in the room yet to declare…

Since 2010, Apple has filed a series of so-called “iWallet” patents that deal with mobile device payments including NFC systems that are linked to credit and debit accounts.

[From Apple nabs parental controls patent for ‘iWallet’ transactions]

Now we read that, dissatisfied by the choices available to them from payment companies, technology companies and software companies, the major US retailers are going to band together and make their own mobile wallet.

Wal-Mart Stores Inc. and Target Corp. are among roughly two dozen retailers working together to develop a mobile-payments system to compete with similar products from Google Inc. and big cellphone companies, according to people with direct knowledge of the project. The push represents an effort by frustrated merchants to get the upper hand in the fast-developing market that turns cellphones into payment devices. The race pits the retailers against banks, credit-card networks, telecommunications firms and technology companies.

[From Retailers Join Payment Chase – WSJ.com]

At a strategic level, this is about more than sticking more coupons in a wallet to provide some value-added services around payment instruments. To the retailers, the payments themselves are a problem. When you hear people in the payments industry asking questions like “why bother with [insert new technology/product/service here] because cards work and everyone’s happy” you know they haven’t looked at the big picture. Not everyone is content with the status quo.

Right now, Google’s Wallet, ISIS and Visa’s V.me are all about taking existing plastic cards and using virtual versions of them, but this must surely be only a stepping stone to new retail payment instruments.

[From Ordinary people]

While it’s a digression here, I have written before (more than once) that much of the analysis that we have done in this space, going back some years, has flagged the development of new retailer-centric instruments as a more-likely-than-not development, an opinion that has been reinforced by the successes of, and lessons learned from, the Starbuck mobile solution.

I’ve suggested that a plausible, logical step for retailers will be to abandon the antiquated infrastructure of payment cards—issuing and acceptance, interchange and rules—for new, retail-centric payment mechanisms.

[From Retail and the long game]

Meanwhile, in the UK, Visa Europe have invested in the Monitise/Carphone Warehouse joint venture to bring the “SimplyTap” service to the high street, hoping to provide a wallet service that is attractive to retailers here. Not wallet wars, exactly, but as I wrote before, certainly skirmishes. I have to say that my personal, early experiences with the rudimentary UK mobile wallet in my Orange phone (which has a prepaid Barclaycard MasterCard and a contactless interface) have been positive: it’s fun being able buy a coffee by tapping my phone instead of getting a card out and I have already (on more than one occasion) lived the dream of the marketing people by leaving home without my wallet but with my phone. I’ve found that the use of the prepaid card works very well in this context. Prepaid cards might be a bit of a pain, but prepaid cards in a mobile wallet are not: you can see what your balance is and top it up while walking down the street.

Fun and mildly convenient… probably not enough to set the world on fire. Karen says that she doesn’t know who will win the wallet wars and I don’t either, but I think I do have some clues as to the winning proposition. The winning mobile wallet won’t be an electronic emulation of a mundane wallet. The mobile wallet won’t be a virtual reality version of a leather wallet. It wll be a hyper-reality version of a wallet: not an electronic version of a wallet as it is, but an electronic realisation of what a wallet should be. At the Mobile World Congress in Barcelona, Alberto Jiminez from Citi called this “going beyond the leather”, which I thought was a terrific description. But what does he mean? How will the wallet in your mobile phone differ from the wallet in your pocket? There are probably three main differences.

First of all, if you lose your mobile wallet, it doesn’t matter in the same way that losing a real wallet does. If you lose that, it’s gone. But if you lose your mobile wallet, then it can be tracked, traced, monitored and turned off. You can go and get another phone and in a few minutes have your wallet restored, automagically via the airwaves. And your phone can be locked, with a PIN today but with your fingerprint or voice in the future. So the m-wallet is more secure than the wallet.

Secondly, your mobile wallet understands context. It knows where you are and what you are doing. If you open your mobile wallet in Tesco, it won’t bother showing you your Waitrose loyalty card. If you’re in W.H. Smith and you have W.H. Smith coupon in your wallet, it will apply it automatically for you at point of sale. Your mobile wallet might contains thousands of loyalty cards, store cards, coupons and so on, unimaginable with the bulging leather version jammed into my back pocket. So the m-wallet is smarter than the wallet.

So what might these actual services look like? In the next two years, expect to see the following worked into your mobile banking, payment and ultimately “wallet” applications:

Deals and offers: Highly targeted, relevant offers based on prior buying patterns and current location. Imagine receiving a time-sensitive text message or in-app alert with a coupon to your favorite electronics store after your digital wallet “checks in” that you are within the store.

Digital receipts and account information updated in real time to give a comprehensive view of personal and linked accounts while also displaying loyalty rewards status.

Real-time, customizable alerts to certify that the purchases being made in an account are valid, based on your phone’s proximity to where the purchase is being made.

[From The Value Of Mobile Payments Is Beyond Transactions – Forbes]

Finally, your mobile wallet is connected. This is where I expect to see the unexpected consequences of innovation! I’ve no idea what will happen when my wallet becomes connected to Facebook, Twitter and Foursquare — although some of Amex’s recent announcements provide some interesting pointers — but I can imagine life getting very interesting! I’ll post some more about the “social wallet” in the future. So the m-wallet has more friends than the wallet.

All of these things together are why I feel that the mobile wallet mania is not only justified but may be a rare case of under-hyping! The history of mobile to date is one of explosive growth, rapid adoption and sweeping change. The secure, smart, connected mobile wallet will bring genuinely new functionality and business models that are very different from the business models around payment cards today.

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



  1. David – many good thoughts.
    Here are a couple of mine.

    The way I see it is that the entire concept of a “wallet” will be challenged just like the concept of a card will be (already is being) challenged. The e-wallet was born because the payment establishment convinced everyone that we cannot live without cards, hence any new payment methods will have come in a wallet. Gradually this perception is not so “obvious” any more. A card is but a carrier of an accounts information that represent sources of transaction funding or means of identification of auxiliary records of data (e.g. loyalty account or rewards program). This said, cards will stick around, given their entrenched market presence.
    What’s next then? An evolution leading us towards new payments instruments, not so much towards new versions of a wallet.
    In my view, it is becoming more and more evident that what consumers want is primarily a payment instrument which combines mobile phone and plastic card access with multiple sources of transaction funding (including a stored value account) and with multiple sources of account loading (including physical cash-in/cash-out stations). Such instrument is expected to work for proximity and remote transactions. It is not a wallet – it is a new payment instrument.
    Consequently, I believe that a transformational strategy with a high probability of success can be defined around comprehensive approach to alternative payments – with mobile access channel being an integral part of it but working in concert with the traditional modalities.
    Such strategy would need to include:
    •Comprehensive, multichannel access (as universal as possible but certainly including mobile phone and plastic)
    •Many and diverse transaction funding sources: stored value account, direct bank account, line of credit, etc
    •SVA cash-in/cash-out ecosystem (harvesting cash for SVA and cash withdrawal)
    •SVA electronic reload ecosystem (from multiple sources including bank account, remittances, payroll deposits, government assistance)
    •Merchant/Payee payment integration for proximity and remote payments; attended and un-attended merchants; real time and off-line payments (e.g. bill payments)

    Such instrument would likely live in the “payment cloud” not on the phone. Phone will be but a sophisticated access apparatus and a means of identification (not authentication) of the user. The 4-corner model will be collapsed and all beneficiaries of the transaction be “directly connected” to the payment fabric.

    In general, the business of payment services will be moving away from the merchant/payee centric model (the pull model) and towards the payer centric model (the push model).
    The payer will be in charge of the transaction sequence and data. The payee will be an important but more passive participate. Some old parties will be disintermediated and money flow will be more efficient and speedy. Interestingly, from the technical perspective, of that can be done today.
    The payment instruments of such category meet or exceed the new criteria that you have laid out: more secure, smarter, connected. But they also do more: they can be universal (phone, network, subscription type, transaction category… agnostic!), simple (no manual required!), cost effective, and available today.


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