November 25, 2011
Over the past couple of years I have been intrigued by the concept of a 'digital wallet' that will combine mobile payments with a variety of other benefits for customers. The more people I talk to, the more convinced I am that mobile digital wallets will mark a big shift in retail payments. A mobile digital wallet is more than just a mobile payment system because it combines:
- Mobile payment. Digital wallets are likely combine several different payments systems into a single service, including mobile contactless payments, online (i.e. web) payments, and over-the-network mobile payments, making it easy for customers to make a variety of different types of payment from a mobile device.
- Barcode scanning. Scanning barcodes or QR codes will let customers get more information about products, and let them pay for items on their phones before showing an on-screen receipt to leave the store.
- Loyalty rewards. Instead of carrying (and sometimes forgetting) a separate loyalty card, digital wallets will track customers’ spending and offer merchant-funded rewards, either on the phone or at the point of sale.
- Coupons and offers. Digital wallets are likely to offer customers coupons and location-based offers.
It’s possible that people will use multiple digital wallets, but it’s easier to imagine most people using one for most transactions. The advantages of being the provider of that digital wallet are likely to be substantial, so over the next few years I think we’re going to witness a series of battles as rival firms and consortia battle for dominance around the world. That battle has already started, particularly in the United States. Much like a war, it’s producing some surprising alliances. There are a number of contenders, including:
- Banks and other credit issuers, probably working in conjunction with credit card networks like Visa and MasterCard. Visa talks about its digital wallet strategy on video here and is planning to roll out its digital wallet (called V.me) next year.
- Mobile operators, probably working in consortia like ISIS in the US, mpass in Germany, or Buyster in France. In Japan, NTT DoCoMo has already had substantial success with its Osaifu Keitai (literally 'wallet mobile').
- Disruptors, like PayPal, Google or Apple. PayPal’s chief executive Scott Thompson wrote about the company's strategy here (with a video here). Google entered battle recently with the launch of Google Wallet in the US on September 19th (short video here, long video here).
It's fascinating because the large number of players and technologies involved makes it hard to predict exactly how it will turn out. It's a bit like the euro-zone crisis in that no one really knows what will happen. But if you work through the scenarios you can start to work out the probable outcomes and see who stands to lose out. Who do you think the winners and losers will be? Vote in our poll* in the column to the right –>
As so often with payments, what this means for you depends on who you are:
- If you work in eBusiness and channel strategy at a retailer or other merchant, digital wallets and mobile apps more widely open up a range of opportunities to improve customers’ shopping trips and integrate digital and physical channels.
- If you work in eBusiness and channel strategy at a bank or other credit issuer, it means that your mobile banking strategy isn’t just about providing access to online banking on a small screen — you are building the platform for your own digital wallet.
We'll be publishing more research on this disruption and what it means for different roles in the coming months. Do you agree that digital wallets will change how people pay? What aspects of these questions would you like to see us research?
*The poll is a bit of a trick question as there will probably be different winners in different countries. But I'd still love to see what you think. 🙂