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Digitalisation of life -and wallets

This article is also available on Medium.

We are living in a digital world. From ovens to car keys, refrigerators to vending machines, each and every device is now running software. Every day we are getting more and more dependent on digital devices. (read it as software)

Excluding the computer and mobile phone, an average person in the Western World interacts with a device running some sort of software more than 30 times a day. Opening a door with an access card, taking an elevator, riding a car, buying snacks from a vending machine, etc are examples of these interactions. Smart phone is of course a huge exception to this; average interaction with a smart phone is between 50-200 times a day, depending on the addiction status of the person. These stats dramatically change when it comes to teens. Humans are now having more interaction with software than with actual humans -or any other life form for that matter.

Don’t get me wrong, I am not against this. This is not something you can go against anyway, this is an irreversible patern.

Digitalisation vastly improved our lives. We are now in continuous communication with our friends, work place, family, people from around the world with similar interests with us. What digitalisation brought to our lives is easier communications with our peers. But more importantly, most repetitive tasks have been replaced with an automated device or software.

Social media has become the single source of information for many people. We can say in confidence that; now there is media and social media. People now have the option to refine their news sources based on their own interests and timing. Traditional communication channels are now transforming into digital versions, the ones that do not digitalise are slowly turning into legacy items in history.

Of course, payments are no exception. Almost any where in the world, people are paying with EMV chip cards which run an operating system and a payment application software on the chip of the plastic card. If you are not making a face to face payment, then you are on a computer or a smartphone making another digital payment. Card accepting device is now either a physical POS terminal or a virtual POS processing transactions from many different channels over the internet.

Payment systems were pretty quick to embrace the digitalisation era. Cards were one of the first products turning into user name and passwords in order to enable payments via web browsers. Then mobile devices came into the picture. In the mobile world, authentication is simpler than web, everything became faster and more convenient for the user on a mobile device. Paying via a non-cash mean is basically a credential based authentication and mobile phones are great with authentication.

When everything started to happen so fast, things that are not so fast (like payments) started to feel the pressure. Typing in the card number was one of them. People can register many online resources via few clicks with their Facebook/Google/Twitter accounts, why not for payments? That’s when digital wallets came in handy. PayPal had already started the revolution long before consumer digitalisation started based on different business cases. Entering the card information once could enable many more benefits to the end user.

Digital wallets may seem in a not-so-fast growth path, but this is inevitable. Any product that is not transforming into digitalisation will end up in a parallelised state.

This is a good time to think about your favorite digital wallet product if you are benefiting enough of it. If you are not using one, you should consider choosing one. Digital wallets will not just streamline your payment experience, but will provide an extra layer of security.

Wallet Wars Episode II : Clone Wars

Mobile wallet wars have started long before NFC. Now it is almost at the Clone Wars stage. Out of the context of contactless and NFC, I would like to share my thoughts on mobile wallet wars.

I strongly believe that digital payments industry has been/is/will be successful depending on how successful the real life payment experience is simulated. The most successful model is the direct one; customer hands over the cash and the merchant provides the product or the service. Simple as that.

When financial institutions got into the picture, they worked as a middle man, who mediates the cash transfer between parties -and takes its cut out of the transaction amount. Still simple.

When internet boomed, companies like PayPal started to emerge and they provided another layer of a middle man; this time between the financial institution and the customer.

I believe there is no more room left in this game for another middle man regardless of the environment that the transaction is taking place. There is enough amount of parties benefiting from the transaction.

Essentially, what wallet providers are offering is to decide who will be in the wallet -and who won’t. They believe that this is something they can do by providing the wallet itself to customer. There are many types of wallets today; MNOs, MNO unions, payment system companies like Visa/MasterCard, internet companies, software companies, even merchant unions claim to provide digital wallets to customer.

Luckily, none of them has been successful to get the customer attention.

I have a few challenges against wallet providers:

  • In the real life, customer is free to choose a wallet of his/her taste.
  • Everyone has only one wallet.
  • Only the customer him/herself decides what card or cash or anything to put into the wallet. Not the company that he bought the wallet from. The war is still between cards and the cash.
  • At the time of the purchase, customer is free as a bird to choose the payment method, not the one forced by the company that he/she bought the wallet from.

Who would buy a wallet, which you can not put anything into it without the approval of some company? Who would carry more than one wallet?

These are all legitimate questions that any company with a wallet project must consider before making the announcement.

A digital/mobile wallet must be transparent against any customer decision, it should just position itself as a container of payment methods. No party should make money on just being the provider of a wallet. No company must put itself into a decision maker position on behalf of the customer to choose the payment method. It is a fact that it will fail.

The most successful wallet implementation so far is without a doubt; Paypal. It provides the customer the freedom to add/remove any payment card. It is convenient as a real wallet, customer just chooses the payment card. From merchant’s point of view, it is an aggregator of payment types with a single point of contact. The real life experience remains same, that’s why it has been successful -and still alive.

BKM Express, a recent wallet platform (that I have a post about) from Turkey is also quite similar to real life wallet experience.

I believe there will be very few wallets remaining in the near future and the survivors will be the ones that successfully simulate the real life wallet experience.

Google Wallet, the American way of NFC

Google has been working on Google Wallet for a long time. We’ve seen the first NFC payment experience via Google Wallet when it was released with a Citi prepaid card on Nexus. The first version came with a pre-installed Citi prepaid account and a 10 dollars. It was a big step for NFC world. Google made a huge step for popularizing the mobile payments. There was a minor setback when it was hacked but Google immediately fixed it.

Now Google Wallet 2.0 has been released and this time there is really an innovation that you’d expect from Google. Google is a cloud company, every Google service gets you to cloud, so why wouldn’t its wallet do the same thing? There is a great idea behind the new wallet, it keeps your card data on the cloud and uses a prepaid card on phone, which works as a frontend processor, or let’s say a contactless/NFC interface to your credit card in the cloud. This way, you can use any of your cards without actually enrolling it on your NFC phone – Nexus, in our case. What a brilliant idea, just as clear as I’d expect from any new Google service.

This is a kind of implementation you’d never see in Europe. Here in Europe, we are using EMV for NFC and it works in a more complex way. Of course it is possible with EMV but it would be far more complex than charging a transaction to a card stored in the cloud via an EMV transaction flow -and with current implementations of NFC in the MNO dominated ecosystem.

It seems we will be in wallet wars for some time more and let’s keep our thumbs up for Google for the smart move. Another big step for the NFC World.

Take a look at Google Wallet in action below:

BKM Express, a new approach to wallet world

BKM is the national switch, clearing and settlement processor and the regulating body for the card payments space in Turkey. BKM was founded by the Turkish banks in 1990 and since then, BKM played a huge role in the development of card payment systems in Turkey.

I have personally involved many part of the story and yet I am again part of another innovative project of BKM. It’s called BKM Express and it sure will play an express role in card payments of Turkey. Online payments in Turkey is on the rise and BKM is playing an invaluable part in this game. The online payments ecosystem, banks, customers, merchants, service providers, solution providers will utilize this product eventually and all players will win.

Basically it is an online wallet where people can store credit and debit cards securely for making payments on online merchant without the need of entering card details each time. This prevents sharing the card numbers with merchants which still many people are not comfortable with. Enrollment is also very user friendly, authentication is processed via text message via the issuer bank which is the very same user experience with the online banking logon. (mandatory for online banking)

From the merchants’ perspective it means integrating once and avoiding all the hassle of technical problems with each bank’s online POS software services. BKM Express also supports the trademark Turkish concept “installment payments” with credit cards. Not just installments, but loyalty program of each bank is supported during checkouts. There is even the option of submitting delivery and invoice addresses to merchant without the need of keying in each time by the customer. Turkish card holders are already familiar with the 3D Secure context and now this is the perfect complimentary for the online payments.

Sure it seems quite similar to Paypal, but this is the first national online wallet initiative in the world -as fas as I know. There are some enhancements over Paypal; it is a product of banks’ platform and it supports installments of each merchant’s offering (includes more than one in most cases) You can add both credit and debit cards, but you will be forced to use a 3D Secure payment which is the national regulation for debit cards.

Currently 9 banks have been certified but this covers almost %80 of the total card market. Pretty good start! It is now under presentation phase with limited number of merchants but BKM is working hard to integrate with more merchants everyday.

Of course mobile application will be coming and it will be a complete solution for the Turkish card holders for an online payment experience.