Earlier this month, over Mother's Day weekend, I rode my ox back to my homeland of Queens, New York, where I visited a frozen yogurt place with my family. When it came time to pay, I took out my credit card, and the cashier took out his iPhone, swiping my Visa with his Square attachment.
"Wow. That's so cool!" his teenage daughter cooed, as the man showed me he could simply email me a receipt from his phone if I wanted him to (I didn't).
Leaving the yogurt place, my cousin turned to me and ranted: "So cool? Oh yeah, great, I'm thrilled to have some stranger swipe my credit card with his phone. That's comforting." We then got into a conversation about digital wallets and mobile payments in general. As a 28-year-old male with a smartphone of his own, he expressed total lack of interest, if not disgust, for the future of these techs. He joked that he imagined accidentally racking up purchases simply by walking too close to items with his smartphone in his pocket.
Maybe you think my cousin's a luddite or his fears are misguided. (Hey that's my cousin you're talking about!) But a recent poll on Internet Evolution would suggest he's not alone in feeling uninterested in a digital wallet-y future. Responding to the question, "Do you see yourself starting to use a digital wallet in the next 12 months?" here's how nearly 100 Internet Evolutionaries responded:
Mind you, our poll respondents on Internet Evolution are tech-savvy and often early adopters, so if 64 percent of our poll-taking users are opting out of digital wallets for the next 12 months, it's probably safe to say that the great majority of average users are as well.
We speak of this just as the digital wallet market is warming up. Visa and MasterCard have both launched services this month, V.me and PayPass Wallet Services, respectively. (Take a look at MasterCard's PayPass Wallet Services promo video below.)
Then there's Google Wallet, which has been around for about a year and has made the news largely because of security flaws.
In a recent blog post on Internet Evolution, ThinkerNetter Robert McGarvey wrote that Apple will need to get into the digital wallets game before that space takes off. Maybe he's right, and Apple's presence would help, but there are many other issues here: Security is an obvious one, though MasterCard will tell you these digital payment systems are more secure.
Other issues: Digital wallets aren't yet universally accepted; and, no matter what the PR folk tell you, swiping a cellphone is no easier than swiping or tapping a credit card. So, why bother?
To be sure, I requested the opinion of everyone's favorite mobile enthusiast Alan Reiter, who told me that the mobile payments and digital wallet industry is still in "fetal stages":
It's still forming as numerous players establish technology platforms, applications, and partnerships. This is the year of jockeying for power and trials to determine if Americans will want this. I suspect mobile payments will succeed only if it includes a wide range of valuable features, such as integrated product discounts, loyalty points, and location-based offers combined with ironclad security.
In other words, we are a long way off, culturally and technologically, before digital wallets and mobile payments catch on. They may be the future, but they're definitely not the near future.
The guy could have been more successful with his experiment in Sweden or Finland, where you can actually live without carrying any cash with you. And where in some years' time we'll see the first cashless economy, that is already in its beginning.
DMendyk: I think you're right about this one. I was enraged recently when I heard that those Verizon customers who were grandfathered into unlimited data plans will soon enough be paying for tiered service. But then I thought, well, I guess I'll be paying for tiered service. At this point, not having the data doesn't seem optional.
Susan - you are right to call me out on my mass generalization.
I was referring to continental Europeans in general - I should have noted the exception of Scandinavia, where technology trends are always years ahead of the rest of the continent and where, I believe, none of the countries have bulldozered their way to near bankruptcy.
I've long wondered about the actual profitability of delivering mobile service. Circumstantial evidence -- customer churn rates, handset subsidies, the need for high subscriber growth rates, high capital costs to handle those subscribers -- suggests there's less actual profit in mobile delivery than we might expect. So operators are looking for as many ways as they can to squeeze extra revenue out of customers. They are fortunate in that it looks like the vast majority are hooked on mobile, which means they'll most likely continue to pay their ever-increasing bills. Until something better comes along.
DMendyk: Thanks, and great points. Re: fees for smartphone services, that's only going to become more of an issue and burden with carriers doing away with unlimited data plans. It looks like carriers are looking to tack on new fees and price hikes anywhere they can. I'm sure they're looking for greater revenue opportunities in this space.
What bothers me are comments coming out of the credit card industry about the impact of these conveniences on the industry.
At a PCI compliance seminar a few years ago a bank rep flat out stated that the move to allow transactions less than $25 to be processed in stores without a signature was going to cost his company hundreds of millions a year in fraud.
They planned to offset the losses with higher per transaction fees.
Am I the only one upset they built a marketing plan they knew would be fraud prone and they pay for the "acceptable losses" by charging the honest retailer higher fees?
The banks know fraud will increase with digital wallets. They are already seeing it with the limited use now. If the fraud loss equals $5 a month per customer they will simply raise their fees $10 a month and pocket the difference.
To top it off, Dodd/Frank bans the store from passing the fee directly on to the consumer, so it ends up being added into the cost of operating. So consumers who pay cash are paying a higher product price to subsidize those using cards.
Personally I would rather have less convenience and more secure banking at an affordable price.
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