Commentary

Show Me The Problem: Now It's Apple's Turn To Make Us Care About Mobile Wallets

Most of you may have taken the long Labor Day weekend off, but the Apple rumor mill stayed busy as tales of an impending iPhone-based mobile wallet flooded the usual channels.

As geeks and analysts anticipate the Sept. 9 rollout of of an iPhone 6 and possibly an iWatch, the typical pre-launch cycle of seed stories emerge. Whether planted by Apple itself to stoke anticipation, or just a natural outgrowth of more people needing to know details of the impending launch, we get this flurry of detailed, multi-sourced rumors a week before rollouts. Kudos to Apple. After having lost its special cultural luster for a couple of years, the company seems to have polished the fruit up again to lure the market into buzzing about its impending releases.

This time it is taking on a project that has humbled more than a few companies before it -- mobile wallets. Multiple reports point to both technological and partnership innovations driving us toward Apple's long-awaited entry into turning the iPhone into a credit card. Last week, the gadget press erupted in news that after many iPhone cycles that failed to deliver an embedded NFC chip, the iPhone 6 apparently will have one tied to an encrypted, secure area of the phone suitable for payments and uses Touch ID for identity security. Bloomberg has the most concise reporting on all of this. Amex, VISA and Mastercard are on board.

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You remember NFC, don’t you? It is the near field communication technology that has been ready for mobile payments for nearly a decade. Built into a number of Android phones, both Google and the ISIS consortium of payment providers tried to convince consumers they really wanted to replace swiping with a multistep app load-and-tap procedure. While many contactless payment terminals already in place at retail do in fact support NFC, the pieces just have not fallen together across this complex supply chain.

In the interim, the field has filled with startup attempts to seize the “market opportunity” of mobile payment. These companies have been the darlings of tech and mobile press that just can’t fathom why the overwhelming mass of consumers are disinterested in the coolness of whipping out a phone to pay for something. Isn’t that neat, they recount in endless articles. Isn’t that pointless, consumers indicate passively by their total lack of interest. Apart from Starbucks, which supplies incremental convenience and value to people using its mobile payment system, most of these schemes are driven solely by the interests of startups and the infrastructure to make money for themselves. I have used this line so many times that even I am tiring of it, but the truth of the matter is that m-payments, as they have been served to consumers so far, are a solution that is desperately, even comically, searching for a problem.

Now it is Apple’s turn to persuade consumers and retailers they really have a problem that needs to be solved. And the fact of the matter is that none of this really comes down to technology anyway. Many analysts pointed to the patchwork execution of m-payments as the source of the problem. Not all credit card providers, retailers or hardware makers could get behind a single solution to make this work. The point-of-sale technology was all over the place and not yet ready to make for a seamless user experience. Everyone was waiting for Apple to come into the market, others claimed.   

Fine -- keep telling yourselves that. But in the end, m-wallets are trying to convince people to change a deeply engrained and highly efficient habit mainly for the benefit of someone else’s business model. How stupid and gullible do these companies think the American consumer is anyway? Sure you can do things like load loyalty points and offers onto a payment app. You promise to push special offers and saving to people right at the point of sale. Because that's what people want -- more advertising. All of these schemes have been tried already in mobile wallets and they tend to appeal to a slice of the base without necessarily removing some major source of friction for the rest of us.

No doubt there is a whiff of inevitability to the phone as credit card model. Millennials, we are told, dispense with traditional wallets and will embrace this first, even as old farts like me scratch our heads trying to find the problem that m-wallets solve. Okay, I get it. I actually have been with twenty- and thirty-somethings who pull out a small deck of credit cards, license and cash held together by a hinged paper clip. Ultimately, as photos, loyalty cards, official ID documents, receipts become virtual, the credit card becomes an inconvenient relic. That is when there is some friction worth removing.

Until then, even mighty Apple has its work cut out for it. Accelerating us toward a mobile wallet world will require making a better value proposition than has been made so far.

4 comments about "Show Me The Problem: Now It's Apple's Turn To Make Us Care About Mobile Wallets".
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  1. Nicole Peterson from The Mothers In Law, September 2, 2014 at 10:46 a.m.

    I'm saving criticism until I see what the IPhone6 has to offer. It's not all about profits. Apple is attempting to solve a BIG problem. I don't think it's 'comical' at all. Consumers are fed up with all the retail security breaches and identity theft issues. They want to sleep at night. Target's sales have plummeted since their security fiasco. It's no fun to receive a letter that your debit card and personal information have been compromised. Maybe retail will pick up if shoppers are confident that they are using an easy, safe, secure piece of technology with personal Touch ID instead of plastic cards that can be compromised, stolen or lost. Maybe consumers won't be subject to all the crazy credit card fees, interest and confusion. It may be wishful thinking, but wouldn't that be a welcome relief -- and a nice bonus?

  2. Matt Silk from Waterfall, September 2, 2014 at 11:23 a.m.

    Steve,

    The mobile wallet debate has clearly been around for years and IMHO the biggest hurdle is how to make paying with your phone quicker and easier than a swipe. I don't think Apple has solved that one yet, but partnering with AMEX is a good start. Maybe the two of them together can help the entire industry move forward and resolve the last mile issue at POS. If they do solve this though, who will own the customer/data at POS is the next big hairy problem to resolve.

    Putting those issues aside for a moment, Apple joining this race is momentous as they have huge advantages over some of those who have tried in the past:
    1.) Pre-loaded credit card--yes, they have a few already on file for customers
    2.) Pre-loaded app--yes, they can install this app native on every iPhone produced moving forward
    3.) Experience with big brands--yes, look at their early work with Passbook. Wouldn't you consider all that work R&D for the game they are about to play?
    4.) BUDGET--yes, if Apple is serious about this space they can outspend quite a few companies and become a major player quickly

    Next few quarters are going to be interesting...

  3. mike boland from BIA/Kelsey, September 2, 2014 at 11:27 p.m.

    I totally agree Steve. Here's my similar rant on the solution in search of a problem concept for mobile payments -- http://blog.biakelsey.com/index.php/2014/04/14/mobile-payments-offer-me-something-better-than-a-thinner-wallet/

  4. Steve Gurley from Pyrim Technologies, Inc, September 3, 2014 at 12:12 p.m.

    Great article. Frankly, I think it's a smoke screen. NFC-based, in-venue payments is so 2012. Going into 2015, we're rapidly moving towards an omni-channel world in which solutions are being built to seamlessly support cross-channel (in-store, on-line and social) commerce (marketing, shopping, payments, loyalty, service, etc.). Worrying about in-store payments is ridiculous in this day and time. I'm confident Apple is smart enough to know that.

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