Digital Wallet Adoption and the Future of Money...
The Pew Internet and American Life Project has released new research findings on the The Future of Money in a Mobile Age. Of particular interest is what it has to say about the proliferation of digital wallet systems - like Google Wallet - currently being deployed by numerous actors, although not yet fully embraced by the mainstream public. Digital wallet systems allow merchants and businesses to accept “on the go” credit card payments from customers using a special card reader that plugs into a smartphone or tablet computer.
In addition to Google, a consortium including Verizon, AT&T, T-Mobile, Visa, American Express, Discover and MasterCard will be piloting a similar NFC-based mobile payment system in mid-2012. Meanwhile, PayPal and Visa have also announced plans for mobile wallet systems, and many analysts predict that Apple will announce its own virtual wallet service in the near future.
Proponents argue that these “mobile wallet” systems hold a number of advantages over the use of cash and credit cards for payment. They argue that these systems are simpler and more convenient for consumers, since users need only carry a single all-purpose device rather than multiple forms of paper and plastic. And because they are location-aware and can track users’ shopping and purchasing behavior in real time, mobile wallet systems can offer advanced “personal shopper” services (such as recommendations and special deals based on one’s location and past purchasing history) as well as improved loyalty programs and more targeted promotions from vendors (a modern take on the “buy ten get one free” card, but with the card stored digitally in the cloud).
At the same time, critics have pointed towards a number of factors that might limit the widespread adoption of mobile payments. For starters, not everyone will use a smartphone. Other analysts raised questions about whether credit card companies will move away from the current profitable system in the developed world. Other concerns include the potential susceptibility of NFC to hackers, market fragmentation, and lack of interoperability of mobile finance systems due to the many different platforms being developed and implemented, and questions about whether consumers will feel comfortable storing the intimate details of their financial lives in the cloud.
As far as how quickly these technologies will be adopted...
Overall, a majority of these respondents supported the scenario that by 2020 most people will have embraced and fully adopted the use of smart-device swiping for purchases they make, nearly eliminating the need for cash or credit cards. These experts feel that the explosive growth in the use of smartphones and other mobile devices, combined with the convenience, security, and other affordances of mobile payments systems, makes these systems an obvious choice to replace established modes of payment in day-to-day commerce.
At the same time, the expert respondents are divided on how quickly this technology will displace established transaction methods. In elaborating on their predictions, a number of respondents indicated that they expect this process to develop generationally, with younger users jumping to abandon cash and credit cards while their parents and grandparents make the move to mobile payments slowly, if at all.
While digital wallet systems are already offering more than simply on-the-go payment processing - for example, rewards programs and location-based recommendations - it seems to me that the largest obstacle to more rapid mainstream adoption is not privacy concerns, as some have suggested. Rather, it's just a question of when a tipping point among consumers will be reached. Like with smart phones before them, once digital wallets start building even modest momentum in the consumer space, expect the floodgates to open and for widespread adoption to happen extremely quickly.