Pots and PANs

Digital wallets and what's in a name?!

09/05/2013 by Dave Joyce at Paythru

You’d have to have been living on the moon to have missed the wallet war (or should that be wars?) raging right now! It seems that not a week goes by without a conference, seminar or roundtable event giving prominent platform space to the subject.

And it was following such an event earlier this week that I was musing on the obvious challenge (well obvious when Dave Birch @dgwbirch posed it!) – any mobile/ digital wallet has to offer more than its leather bound analogue offers today - payment just isn’t going to be enough.

Check out this clip from American comedy series, Seinfeld:

Today I carry just one wallet - it contains my payment cards (my PANs), prepaid cards (my “pots” of spending for specific purchases), my cash, my loyalty cards, some paper vouchers, my ID… although clearly getting all of this into one wallet does come with its challenges! (If you don’t have time for the whole clip then the last 60 seconds makes the point). And whilst it is a little bulky at times, I don’t have to worry about which wallet I take out with me, nor worry about where I can use it – I’ve never been refused at the point of sale for having the wrong wallet!

It’s evident that settling on the definition – and ergo the functionality - of a digital wallet is a major challenge. Moreover, the proliferation of digital wallets means that as a consumer, I am left with a bewildering choice, and therefore confused, as to which wallet to use and when, not least as no digital wallet is anywhere close to ubiquitous acceptance. And a lack of ubiquity coupled with consumer (and merchant) confusion is the enemy of adoption.

Add into this mix the land grab that each of the main stakeholders - MNOs, Banks and schemes, and in some cases the retailers (or groups of retailers vis MCX in the US) themselves are attempting to make in this space, resulting in a lack of standards, both technical and from a UX perspective.

Clearly the opportunity for collaboration is crying out. But what form should this collaboration take? My experience in payments over the last two decades suggests that a key component of collaboration needs to focus on “interoperability”. The ability for a wallet, or wallets, to work across multiple merchants/ sectors, across multiple channels, is in my opinion, fundamental. But interoperability comes at a price – speed and cost of implementation. And it clearly opens the market up – which not all players, especially the more established ones, want to see happen.

In the past, achieving interoperability was a major hurdle. But this doesn’t have to be so today. Part of the solution is open APIs, allowing parties, such as merchants, to easily integrate multiple [wallet] offerings into their platform; APIs that allow wallets to communicate with other wallets, and data, on the user’s device(s), creating a seamless experience for the user (a user like George!). The concept of a “hyperwallet” – an environment where wallets and data can interact - was presented by Dave Birch at the same event earlier this week, and judging by the audience reaction, it resonates with most stakeholders.

Retailers especially, have the most to gain here, as it would allow them access to more than just the transaction information they see today. In effect it would put them back at the heart of the relationship with the consumer, disintermediating the incumbent beneficiaries of this data, and provide them with leverage for discussing the value of the transaction with the parties to who they pay fees today.

Will this become a reality? There are some signs of this, for example with the MCX consortium in the US. Although it’s clear that whilst institutions such as banks are used to collaborating (to achieve interoperability) via the ICS and domestic bodies such as APACS, Carte Bancaires etc…, the retail community is still finding its feet. And like their banking counterparts, some voices are louder, and budgets deeper, than others.