The Expanding World of Mobile Payments: Digital Wallets

We’ve been talking a lot about how the world of mobile payments has been expanding lately, and today we’re going to continue the discussion. Our mobile payments series started off by taking a look at the evolution of point-of-sale and self-checkout solutions, and now we’re going to check out what’s happening with mobile “wallets.”

In a far distant past few of us remember, cash was the primary means of transaction in the marketplace. Since then we’ve become accustomed to the precious pieces of plastic we’ve dubbed “credit cards”, and created many adjuncts the shopping experience such as loyalty cards and coupons. Now the burning question is—can digital “wallets”, or smartphone-based payment solutions, replace physical cash, cards, and coupons?

Many major corporations with interests invested in payments—including Visa, MasterCard, Discover, AT&T, Verizon, T-Mobile, Google, Paypal, Square, Wal-mart, Target, 7-Eleven, Sunoco and Best Buy—are betting that mobile “wallets” will be the next big thing. They’ve demonstrated their faith in the concept by facilitating the eruption of digital “wallet” solutions in today’s market.  Some are even whispering that Apple is eyeballing this space with the creation of its Passbook app. One notable solution that’s slated for release this month is ISIS, the mobile “wallet” devised by AT&T, Verizon, and T-Mobile.

Here’s a great video describing how the ISIS mobile “wallet” works:

And this video describes the type of information ISIS stores:

Although we think solutions like ISIS are super cool, we’re skeptical that the world is ready for NFC-based checkout. A few years ago Google announced that it was creating “Google Wallet”, an electronic payment service that attaches your credit card to your Google account, giving Google the ability to process payments on your behalf. The factor that differentiates“Google Wallet” from Paypal is the mobile app that allows users to pay for items in certain stores by tapping a NFC device against a payment terminal. Despite all the hype, Google Wallet failed to see any real traction in the marketplace. Suffice it to say, between the lack of NFC-capable devices and the lack of stores in the Google Wallet network the momentum around the launch was non-existent. The forecast shows that ISIS may be in store for similar weather. Some rumors suggest that NFC could make a big leap in the marketplace if Apple decides to include it in the iPhone 5, set to be released tomorrow. Even then, it would take years of consolidation and standardization between competing solutions before a viable NFC-based solution took hold.

Google recently announced that they’re adding a new string of features to their “wallet”, including identity management (i.e. store your ID on your phone) to try to bolster its value. So, Google Wallet isn’t dead yet, but its feathers are certainly tarnished.

With many of the biggest payment companies in the world betting on the success of “digital wallets,” it’s easy to make the claim that one of these solutions must succeed, but the wise will be weary. The space is volatile, the options are expansive, and nobody really knows how consumers will react.

We’d love to hear your thoughts on the future of mobile payments. Will mobile wallets succeed? Which company(s) will dominate the space? Share your thoughts in the comments section below.

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