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digital wallet insights

running commentary on what's happening and what makes sense

by SK Laney

insight - 11-12-2013

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Digital Wallet insights are ephemeral like the life of a flower, seeming to be announced and fade away just as quickly. Google Wallet, Square, Samsung Wallet, Visa, PayPal here and more. But hey, we're in the bleeding edge of the technology and it's fun to watch this new evolution of payments, which in the last few years products were announced, ads were broadcasted, news stories were posted, yet digital wallet products always seemed on the verge of 'something' instead wilted into the background. All this while retail apps have flourished.

To provide more insight as it evolves, I will post a weekly insight into what's going on in digital wallet. Why do I call digital wallet apps ephemeral? So far these campaigns have begun, then fallen away without traction with surprising frequency, and as well, ephemeral is my favorite word, and deserves a little spot on my site. I call this 'synergy', and yes, I am a word geek. I will spare you my many 'Dr. Who' references that come to mind. Geek speak isn't for everyone, I know.

Some of these insights will hopefully prove to be prescient and justify the section title of 'insight'. Time will tell. Did I mention my second favorite word is 'prescient'? Coincidentally enough, my third favorite word is 'obfuscate', which sadly describes the current state of digital wallet sometimes,to make obscure and muddled or confusing. The goal of our insight column will be to AVOID obfuscating, we don't want to make digital wallet MORE difficult to understand. We seek to do this by applying common sense to the technological developments, hopefully providing both clarity and useful ideas. I hope my background in IT and finance will prove valuable. I was in IT when the WWW came to be in the 90's when the 'world wide web' and '' references were as foreign to EVERYONE as 'digital wallet' is today. Early 90's were a truly fun time to be in IT working on web development, and watching the evolution into daily life that is taken for granted. Like all innovations, many players see billions of dollars, and everyone dives in from startups to company ventures to the existing players (here MasterCard, visa,etc) to defend their turf. So far, the winners and losers are 'to be determined', but winners and standards always emerge, as well as niche markets for smaller players. Again, time will tell.


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Hey, why is digital wallet taking so long

Once a week, we ponder and take a holistic approach to the digital wallet market. Today, it's about the digital wallet user experience and why the key focus is being ignored so much. As an MBA student, we often come back to the same concepts over and over again. For example, over and over we return to thoughts about 'differentiation' and how your business is unique to competitors. When it comes to innovative products, we often come to the concept of innovation and how you create a better product or service to beat competitors. Products innovate all the time, and digital wallet spans the same needs. People already have ways to pay, but digital wallet is based on the notion, seemingly obvious, that your mobile phone is both convenient and can enhance current ways you purchase. So Why haven't digital wallet apps caught on yet? I see two main reasons- trust and user experience. Let's look at both.

First, trust. Let's be real, trust is the cornerstone of a purchase. Do I trust the product or service, do I trust what I'm buying, and when it comes to money, do I trust where my money is going and how. That's a key part of digital wallet, consumers have to trust that the process is safe and secure. Not only that, but if they trust the traditional methods MORE, they will chose them since they have 'comfort' with the ways that have worked well in the past. We refer to this s consumer behavior, and people seek comfort with the familiar. You simply can't ignore human behavior. To get consumers to change their ways, customers must see a benefit to even a slight increase in risk and EVEN to simply changing how they do things. With debit cards and credit cards, people see the benefit of convenience and safety measures of online usage, and most people go ahead and use their cards online.

User Experience is the second issue, and I suspect a direct result of this innovation in the hands of techies. My MBA is finance, I worked in IT for over a decade. I'm comfortable with complication. Most people aren't. Here's a money example. If I give most people 10 great retirement plans to choose from, they won't want to make a choice. Many will say it's too complicated, and put off the decision. Some will go through the options, figure out a mix, and be happy that they made a good choice(people like me), but wonder if they could have done better. The last group will simply not make a decision until forced. In a way, Mobile apps tend to force developers to a simplified interface (a nice perk!), but digital apps have a lot going on, and the key is to make the process intuitive, This will require extensive user experience research,which is likely ongoing. Also requires product developers to laser-focus on user experience. Trust is required before user experience, but the apps that get BOTH pieces right will gain market share.

Here's a quick retail app example. I was in the supermarket, using my grocery store app. For whatever reason, my app wasn't opening up. No data connection was the message. I'm annoyed. Some features require an online connection, but opening my app should NOT be aborted since I wanted to both use the reward card for scanning AND check out any coupons. At the least, I should be able to open my reward card for scanning regardless of the connection. I couldn't, and I simply pulled out my key chain to scan. But if the point is to replace your wallet, that's a failure. Now, I could have given my phone number, but that varies. So, could I have gone to the store with just my mobile app? Not sure. If this happened with a digital wallet app because of my phone carrier coverage, I'd still need to keep wallet items.line


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