Where's My M-Wallet?

February 2012 Integrated Solutions For Retailers

By Matt Pillar, Editor In Chief

For nearly four days last week, my phone was lost. I found it by chance — perched high on a shelf in my garage for reasons that remain unknown — thanks to a friend who happened to be calling as I was digging through my truck, looking for something else I’d misplaced — my wallet.

My carelessness got me thinking about the mobile wallet concept. A recent study from KPMG found that just 23% of consumers would be willing to use their mobile device in lieu of another form of payment. Yet despite the unpopularity of the concept, device manufacturers, payment processors, banks, software providers, and even several retailers are pushing forward with m-wallet plans. Collectively, they think it’s only a matter of consumer education and time before the interest and adoption builds. I’m not so sure. Five-plus years ago, many of the same players were saying the same thing about smart cards. Where are they now?

The consumer perception that using a phone as a payment device is risky and unsecure is much more formidable than the barriers to smart card adoption. Nearly everyone has purchased at retail with credit and debit cards — smart or otherwise — and a significant percentage of us have had those cards lost or stolen. When that has happened, the world hasn’t come screeching to a halt for the vast majority of us.

Can’t say the same about your iPhone, can you? Lose that baby, and it’s cold-sweat panic time. That said, payment processors and players like Google Wallet are making the case that, with the proper “lockdown” mechanisms in place, phone security can be more robust than card security.

Security aside, the phone-based payment process of tomorrow has to be easier than the swipe-and-key or swipe-and-sign we know today when we use plastic. As long as I’ve got a driver’s license and a few dollars to carry anyway, I’ll probably have my wallet on me. If it’s just as easy (or easier) to swipe a card, I’ll have no incentive to use my phone. If I can find my wallet, that is.

There’s another big obstacle to the m-wallet, and that’s the technology infrastructure to enable it. The phone application is one thing. The store-level contactless devices are quite another. There are some notable retailers playing with them in select stores — American Eagle Outfitters, Gap, and Toys“R”Us, to name a few — but the devices aren’t cheap.

As consumers embrace the convenient shopping applications now available for their smartphones, such as mobile e-commerce sites and loyalty programs, I think we’ll get a few clicks closer to the acceptance of the phone as a payment vehicle. But I think we’re a long way from the tipping point.

Aite Group predicts global phone payments will reach $22.6 billion in three years’ time. It’s a big number, but a tiny fraction of total retail sales. Personally, I like the idea of making payments with my phone, if for no other reason than it provides another option or a backup to the cards and cash in my physical wallet. Of course, it would have done me no good last week when they were both lost.