Do consumers want a mobile wallet?

Thursday 18 October 2012 | 12:06 CET | Background

Two recent articles question whether consumers actually want or need mobile wallets, despite the fact that the other players in the value chain such as banks and telcos are pushing them.

Anuj Nayar, a senior director at Paypal recently stated that Paypal should not be considered a mobile wallet, as he doesn’t want Paypal to be considered part of a group of companies which are using technology to create solutions to non-existing problems. His statement implies that it is not consumers asking for mobile wallets but the industry trying to impose it upon them. According to Nayar at Pymnts.com : “..mobile wallets do not seem to be exciting people as much as Internet shopping did in the 1990s. The problem is that mobile wallets don’t solve any customer pain points by themselves. They don’t offer intrinsic advantages over swiping a credit card or heaven forbid, paying cash.”

A recent smart brief by M for Mobile points out that, actually, mobile wallets have several negative aspects to them. What if you’re in the middle of a transaction and your smartphone battery dies? What if mobile payments are the only accepted means of payments, but there is a computer or electricity failure?

This was highlighted by the issues that arose at Wembley Stadium during the summer Olympic Games in London. As Visa was one of the main sponsors no other credit or debit cards were allowed. Visa also tried to make this a contactless Olympic Games, promoting its contactless payment facilities. However due to a problem with the Wembley IT system, spectators were not able to pay electronically and had to use the old fashioned method of paying by cash. However, as Visa was the main sponsor, across the Olympic venues cash machines not operated by Visa had been removed, leaving a shortage of points for people to get cash.

However as M for Mobile’s smart brief states, many different consumer surveys point to the fact that more and more people are willing to pay with their mobile and are even expecting that in the future they will pay with their mobile. This expectation is exactly what seems to drive the various players to continue developing mobile wallets. Apple now also seems to be joining the group as it has just been rumoured according to pymts.com that Apple will begin rolling out an updated version of EasyPay, its point-of-sale system software, to Apple retail employees. Employees will then be able to scan customer Apple Store payment card codes directly from an iPhone or iPod.

Next to the potential issues mentioned above, consumer surveys often point to security fears as an issue holding them back from using mobile wallets. The technology is in place to put in several layers of security as Visa and Mastercard have demonstrated, so this is more a consumer perception issue than a technical issue.

As has been stated before, by us and others, there is a real difference between the high income and low income countries due to the different levels of existing banking infrastructure. In the high income countries a mobile wallet has to compete with existing and efficient credit and debit card systems. The immediate advantages of a mobile wallet are less clear to customers there, as they don’t need to carry cash because they can use their debit cards for small amounts too. However, surveys have often pointed to the fact that these days mobile phones are so ubiquitous that people are more likely to forget their physical wallet than their mobile phone. It certainly seems that the younger generations are so entwined with their mobile that paying by mobile is a logical next step for them. Therefore it seems that, although currently consumers are not actually feeling the need for a mobile wallet, the mobile wallet will continue to advance in the high income countries simply because smartphones are becoming the norm, and if you are using your phone for navigation, watching tv, listening to music and the like, then why not also use it as a means of payment? However, unlike some proponents of mobile wallets would like to suggest, this does not mean that card payments or cash payments will be phased out anytime soon. It will simply mean that consumers will have another payment method at their disposal.

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