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.

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