[Dave Birch] I had an interesting afternoon working with a client on some mobile wallet-related propositions, which are the focus for quite a few people in this business right now. It wouldn’t be appropriate to comment on the specifics of the propositions, of course, but I’m sure it will be OK to make a general point. These propositions should be more radical, and asking the public what they want from mobile wallets is a waste of time.

Smartphone penetration in the UK may be 60% and rising but 2013 is unlikely to be the year of the mobile wallet, according to ICM Research.
A survey of 2015 Brits shows that a third would definitely or probably use their mobile as a wallet to make payments, collect vouchers, to use as event tickets and on public transport.

[From Finextra: 2013 unlikely to be UK’s year of the mobile wallet – ICM]

Oh well, only a third. Perhaps it’s something to do with security. Polls that say that mobile wallets are not going to catch on often cite consumer concerns about security as one of the main reasons for that. 

A survey has found that French consumers are more interested in the idea of using their fingerprint to identify themselves when making a payment than in using a mobile phone for the purpose.

[From French consumers prefer fingerprints to NFC • NFC World]

Well, mass-market biometrics are on course for mobile phones this year anyway and I am sure they will improve the perception of phone security whether they have any impact on the actual levels of security or not. But let’s go back to the survey.

A survey of 2015 Brits shows that a third [overall – it’s half for smartphone users] would definitely or probably use their mobile as a wallet to make payments, collect vouchers, to use as event tickets and on public transport.

[From Finextra: 2013 unlikely to be UK’s year of the mobile wallet – ICM]

Now, to be fair, I don’t really pay any attention to what the public say about anything, but I am curious as to why a story that says that half of all smartphone users would use their phones for payments, ticketing and loyalty then headlines the mobile wallet as “unlikely”? Perhaps it is because the public don’t really know what a mobile wallet is or what it might do (other than act as an expensive an inconvenient replica of the wallets they already have).

This was a point that I made when I was invited by Total Payments (my favourite people right now because they said I was the most influential emerging payments expert in Europe – thanks guys) to give a “pecha kucha” talk. A pecha kucha is a presentation format of 20 slides that are displayed for 20 seconds each, which gives you 400 seconds (six minutes and 40 seconds) to make a point. I can’t say I was entirely successful (I ended up skipping a couple of slides) and I can’t say it’s really the format for me, because I like to engage with people and explore issues so that I learn too, but it was fun. You can judge whether it was effective or not for yourself here.

So irrespective of what people say, I am sure that they will be using mobile wallets, with two provisos: one is that we make mobile wallets hyper-wallets rather than virtual wallets, as I’ve written before, and the other is that we do deal with that security issue. And that, I think, might be relatively easy.

Your credit card is a data string, not a physical piece of plastic: why not enclose that data—and the privileges and responsibilities it unlocks—in a remotely accessible mobile container with an extensive system of checks and balances that has a much healthier respect for that data?

[From How A Stolen Wallet Made Me A Mobile-Payments Enthusiast | paidContent]

That isn’t to say that security isn’t a huge problem. It is, but for a different reason, which is the cost and complexity of the infrastructure that it demands. The Atlanta Fed highlighted this (as did a great many other people).

While, as noted in our 2011 mobile industry position paper, firms engaged in rolling out new mobile payments services have agreed that successful near-term adoption will rely on common standards for security and interoperability, free market dynamics dictate that all players in this new mobile ecosystem will not necessarily work together, motivated instead by a responsibility to create shareholder value

[From Portals and Rails]

This is why if you are, say, Visa and Citi and Vodafone, then there is a long and complex path to a wallet and handset and SIM and secure element combination that can deliver security appropriate to mass-market, population-scale payments. The combination of security and interoperability that the industry chose was the EMV, Secure Element (SE), Single Wire Protocol (SWP) and SIM-based model.  Sorry to sound like a broken record, but security is a problem partly because of that chosen model, not because of mobile payments in general. As we have long maintained, mobile payments will be more secure than card payments. As Cindy Merrit from the Atlanta Fed said succinctly:

the mobile phone will be a much more secure payment device than the plastic cards we use today

[From Portals and Rails]

I agree wholeheartedly. Consult Hyperion’s position has always been that the future “something present” transaction (SP) will more secure than either card present (CP) or card-not-present (CNP) transactions are now, and that translates to a cost differential.

In fact the bottom line is that the fraud figures have been improving, and I expect them to improve further still over the next couple of years as we begin the integration of cards and mobiles.

[From Digital Money: The fraud trajectory]

Now, the general public have never heard of SEs or Supplementary Security Domains (SSDs) or Trusted Execution Environments (TEEs) and wouldn’t understand what they are even if you told them. So if we can find a way to overcome the security infrastructure problem, then it’s not going to overcome the security problem for consumers.

The results of a survey released today reveals that people would prefer to lose the contents of their wallets than their mobile phones. The study asked what people would most fear losing from their back pocket – 37% said their ‘personal phone’; 20% their ‘company phone’; 25% said ‘£50’; with just 18% citing ‘credit cards’.

[From New Media Knowledge – Survey finds people stress more about losing their phone than their wallet]

Surely it’s also about people understanding their rights under relevant national laws? The reason I couldn’t care less about losing a credit card is that it’s not my problem. I ring up the bank and they send me another one. I doesn’t cost me anything and while I’m waiting for it come, I just use another one instead. If I lose my phone, it’s a pain in the arse for a couple of days until the replacement shows up and I have to pay for the lost-or-stolen insurance if I don’t want to have to buy another phone. Hence my suggestion yesterday for where it might be fruitful to focus on building a strong wallet proposition: the lost-and-stolen issue. If the industry can turn this from being a concern into being a selling point, we are definitely on to something.

Hence: maybe the USP of the hyper-wallet is recovery. If I lose my wallet, it takes days, weeks or perhaps even months to reconstitute. If I lose my hyper-wallet, I go to the phone shop and get another phone, turn it on, enter my PIN / fingerprint / voiceprint and ID and hey presto five minutes later my Visa card, my Starbucks app and my Safeway loyalty card are all up and running again. This is the “Marks & Spencer” theory. If we make consumer absolutely confident that when something goes wrong they will be taken care of, then they won’t focus on the things that could go wrong, if you see what I mean.

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

1 comment

  1. Hi Dave

    To your point on “maybe the USP of the hyper-wallet is recovery”…

    At the SXSW 2013 session “Music Festivals Powered by Tech Innovation” Mikolaj Ziolkowski from Heineken Opener Festival had an interesting point, when they were discussion cashless festivals. And that was, that they didn’t believe in using the smartphone for festival payments, since it was too expensive to replace.

    I agree with your statement that it would be “easy” to get a new smartphone and just get everything downloaded back on to your device, but not necessarily less expensive – probably quite the opposite.

    So it is also interesting to look at this whole thing from a “what does my medium of payment cost to replace vs. how likely am I to lose it”. So mobile for everyday high street shopping – card, chip, token, finger for more off the grid adventures.

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