One of the many developments in digital and mobile commerce is the introduction of digital wallets to authenticate transactions and initiate payments. The functionality is easily transportable into the mobile world via a smart phone, often with tap & go payments enabled by means of a sticker on the phone.
Mobile wallets have not taken off as quickly as many had hoped. The Vocalink/Cognizant report on mobile usage states that current mobile payment activity is dominated by Mobile banking apps and PayPal Mobile, with other methods (including other wallets) attracting at most 12% of mobile payment users. Contributing to this sloth are fears over security, concern over device theft and the limited number of outlets where they can be used. Above all, though, is the belief that they are no more convenient than a debit or credit card and the consumer sees no incentive to change.
Nevertheless, there are many new initiatives, for example, MasterCard has this week announced the UK launch of its MasterPass mobile wallet and a new pre-paid mobile card service is being offered by Kalixa, the payments specialists, again in conjunction with MasterCard.
Yesterday’s announcement that the ISIS mobile wallet will be rolled out nationwide in the US is however particularly important for the future of mobile wallets. This launch, a joint venture between AT&T Mobility, T-Mobile US and Verizon Wireless will determine several issues. Will a mobile wallet displace the use of cards? Will it become a scale advantaged competitor to banking apps? And most importantly, will Mobile Network Operators be able to play a significant role in mobile commerce – or just be relegated to the role of messenger?
My current assessment is that the mobile wallet will have some success, but in the UK only in niche markets. Mobile operators will probably have to look to other geographies to build a profitable and substantial business. We shall return to this issue in later reports.