Digital Wallets and Mobile Payments

Mobile payments and digital wallets are beginning to edge their way out from the realm of science fiction. eMarketer reports that the forecast looks promising: US mobile payments will top $1 billion this year, and are expected to blossom to an estimated $58 billion within four years.

As reported in The Kansas City Star, The Carlisle & Gallagher Consulting Group estimates that within five years half of the people with smartphones will utilize mobile wallets for most consumer purchases. Currently, that same half hasn’t even heard of the concept.

Digital wallets rely on various types of technology, ranging from embedded chips to geo-fencing, which is indicative of the burgeoning field. Google Wallet allows you to load bank information onto your smartphone, so that when it comes time to pay you just wave your device. Square uses a picture of you for verification that pops up during payment. A cashier can then simply tap their screen.

At the moment, the options are pretty widespread – but the war is on. As time goes on, and the industry gets more pervasive, the volume of technological options should pare down to a select few.

But these few can be so futuristic that we might need Milla Jovovich to don another vinyl bodysuit and reinvigorate her plethora of knowledge regarding Brazilian Jiu Jitsu. A recent article from Help Net Security reported the presence of facial recognition and QR codes which would sync using a cloud for more secure mobile withdrawals at ATMs. This technology comes partly as a response to the increase in credit-card skimming, a crime that relies on an electronic device that captures account numbers when cards are swiped.

Coincidently, it seems one of the biggest issues with converting the audience from literal to digital is security. 47% in a recent comScore report say this is their primary reason to skip it. People just aren’t sure, especially when it comes to chips and other technologies that “grab” information from approved distances. It could be easy to make mistakes if so many smartphones are hovering in the same area. One accidental tap or sync, and a bank account is charged.

The platforms for wallets are also inconsistent. Dependent on your device, the options can be limited. And stores are picking their favorites, too. Isis Wallet has become the choice for major wireless carriers like Verizon, T-Mobile, and AT&T, while Sprint goes with Google Wallet. Even more, specific merchants have launched their own versions, like Starbucks. Other retailers like Wal-Mart, Target, CVS, and Best Buy have decided to implement their own, too – Merchant Customer Exchange. You could eliminate your physical wallet, only to overstuff your smartphone with apps. At least you won’t have to carry it around in your back pocket, where rumors of tumors may start to surface (insert George Costanza reference here).

But the idea of a single, streamlined app may be missing the mark. According to Bloomberg, “The goal isn’t necessarily one elegant mobile phone payment method for everyone, but a vast array of apps aimed at different financial problems – from clipping coupons and tracking receipts to paying rent and exchanging currency.” The smartphone is a simplified medium for stacking volume: Even with 300+ apps, all you deal with is a single, slim device.

To add to the dragging feet sector, reports are in from Bloomberg Businessweek that Google Wallet is – at current – a bit of a financial black hole. Dropped into the abyss was $300 million just for startup development, only to be downloaded less than 10 million times since its launch in 2011. However, Google just recently announced a new product – Google Helpouts – which allows both individuals and businesses to sell products through live streaming video. Helpouts is rumored to be integrated with Google Wallet, according to a recent article, with hopes of reinvigorating the product.

But the mobile payments industry is more than just digital wallets. Many retailers are beginning to implement device-armed cashiers to avoid pile-ups at the traditional registers. According to PYMNTS.COM, Staples just announced a new “omnichannel store” concept to impact 45 current bricks and mortar locations. This design would shrink the physical space, utilize mobile checkouts, and facilitate in-store pickup of online purchases. Many merchants have found the use of portable POS systems vastly more convenient than installing and maintaining a dedicated terminal. Both accepting and making payments through a device is something that just makes sense.

At the moment, reports are grim. While mobile payments expect surges, the wallet side of things is only twitching. But this is just the beginning. Digital wallets and other mobile payment systems are not just a fantasy drummed up by app-happy tech start-ups and eager big business. It seems likely that the industry will address many of the concerns raised by the public within the next few years, especially since they all have their eye on the prize.

And the titan that emerges triumphant after this particular war can boast their own stuffed wallet, crammed with potential profits from the projected $58 billion dollars in transactions.

Photo credit: Casey Fleser

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