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I had assumed that the world had got bored with talking about mobile wallets by now, but that certainly wasn’t the case in London last week, where I had the great fun of chairing a couple of discussion panels on the topic and found new perspectives on the likely marketplace trajectory.
For my day out of the office chairing part of the Digital and Mobile Wallet Summit in London, I thought I would be tough on the panelists and presenters and force them to say something new, but actually there was a lot of new experience to share, a lot of new thinking (and re-thinking) going on and plenty of talk about in the end.
I challenged the first panel of the day to come up with a working definition of what a digital wallet is, if only for the purposes of discussion during the day. After some interesting debate, they came up with a pretty good set of three bullets points that I think provide a framework for discussion:
- Wallet as transaction enabler.
- Wallet as communication co-ordinator.
- Wallet as collector of experiences.
I think this is a rather useful way of structuring thinking and it maps to our ideas coming from a more technological perspective, so I think I’ll try and use it for a conference presentation and see if it works. I thought the panel discussion, with its emphasis on the non-payment aspects of the wallet, reinforced my own prejudices about the central role of identity as a transaction enabler but also echoed the Euro Banking Association’s recent opinion papers that I happened to have been reading on the train on the way to the event. There is one on Digital Identity called “From Check-out to Check-in” and one on Next Generation Retail Payments called “User Requirements for Next Generation Payment”, and I found them both useful sources of ideas that I’ll blog about in the near future.
The second panel, which was more focused on retail POS and the consumers, was looking at the kind of services that might be delivered using the wallet. One of the panel members was my old sparring partner Richard Brahams from the British Retail Consortium (BRC) and another was Alberto Perez Lafuente from Bank Inter (the first “HCE bank” out there), which made for an informative (and entertaining) exploration of a variety of perspectives, including a rather interesting diversion around the nature of future competition: are banks, retailers and everyone else going to end up playing bit parts in the movie of future commerce? Someone (I can’t remember who) said that the “big five” of Facebook, Apple, Google, Amazon and PayPal would end up forming the “commerce layer” with the banks and retailers as their fulfilment mechanisms. I’m not sure I share that gloomy prognosis but it’s certainly a point that there are some structural changes afoot and that stakeholders need to develop a strategy response to them.
One of those structure changes is, of course, the arrival of the digital and mobile wallet as a core component of future commerce. My feeling, to be honest, is that the wallet is unlikely to be an app or a single service but more of an infrastructure that the service providers will use, a position that I’ve held for some time.
During the rest of the day I also particularly enjoyed the case study on Lipa Na M-PESA from Kenya. Sitoyo Lopokoiyit, the head of the M-PESA strategy department at Safaricom, explained how the “pay by M-PESA” service was taking M-PESA to the point of sale. They already have 100,000 merchants signed up (making them Kenya’s biggest “acquirer” as there are only 12,000 Visa/MC merchants) and hope to have 200,000 signed up by the end of the year. They charge 0.25% to 0.4% transaction fee, which is very competitive compared to cards. The merchant using the SIM-based mobile POS terminals. He gave great case study of Diageo – integrated into ERP. 10% of fuel purchases (very thin margins) and talked about the
I also enjoyed Carol van Cleef’s presentation on regulation. I ended up in a vigorous debate with Carol about the American AML regime, the FATF’s 2013 recommendations on risk-based approaches to regulating low-value payments, the relative merits of European and US regulatory approaches, the lack of cost-benefit analysis around AML, the purpose of payment regulations and much, much more.
But the main takeaway from the day, and the point of this post, is the main takeaway from the first panel that several of the presenters (e.g., Mea Wallet from Norway) emphasised: It is a mistake to think of the digital wallet as being primarily — or even mainly — about payments. If I hadn’t run out of time because I was arguing about the cost-benefit analysis around AML, I would have used my talk to relate the points made about identification, authentication and so on to the “3R” business model that we have been using with our clients to help them to develop their business strategies: Recognition, Reputation and Relationships. But more on this another day.
Now that I’m not pushing a particular mobile wallet, it’s easier to see that to most consumers their phone is their mobile wallet. They expect the banks, retailers and other companies whose services they use to provide a compelling mobile experience via an app which they will quite happily find on their phones, store by folders, etc. without need someone to package it neatly up for them as everyone seems to want to do.
Where there is an argument for having an ‘express’ wallet app with the most used cards presented in a quick access environment is for POS payments & loyalty, where someone having that app guaranteed to be on the home screen of the phone and ‘always on’ would be very useful to consumers, and that’s where the OS providers will have an advantage. I can’t see a Bank wallet allowing any Bank cards in there and having a deal with every retailer.